-The Above Figure Shows the Utility of Wealth Curve for a Homeowner

question 229

Multiple Choice

-The above figure shows the utility of wealth curve for a homeowner whose only possession is a $50,000 house. If there is a 20 percent chance that the home could be entirely destroyed, would this person buy a $20,000 insurance policy to replace the house if destroyed?

• A) No, it is too expensive.
• B) No, he is not risk averse.
• C) Yes, the homeowner would pay even more.
• D) Yes, this is the most the homeowner would pay.

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Definitions:

Subordinates

Individuals who are lower in rank or position in an organizational hierarchy and typically report to someone with higher authority.

Stir Up

To provoke or evoke a reaction, emotion, or movement.

Systems Theory

An interdisciplinary theory about the nature of complex systems in nature, society, and science, aiming to understand how such systems function and adapt.

Interactions

The reciprocal action or influence between two or more entities in a particular environment.