The Greater the Rate of Decrease of Marginal Utility for an Individual

question 10

Multiple Choice

The greater the rate of decrease of marginal utility for an individual,

• A) The more risk averse the individual is and the more willing the individual is to pay premiums above the actuarially fair premium.
• B) The less risk averse the individual is and the more willing the individual is to pay premiums above the actuarially fair premium.
• C) The more risk averse the individual is and the less willing the individual is to pay premiums above the actuarially fair premium.
• D) The less risk averse the individual is and the amount the individual willing is to pay premiums above the actuarially fair premium is constant.

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Definitions:

Total Utility

The complete fulfillment derived from the consumption of a specific amount of products or services.

Utility-Maximizing

The economic principle where individuals or entities choose to allocate their resources in a way that maximizes their satisfaction or utility.

Marginal Utility-To-Price Ratio

A measure of the additional satisfaction gained from consuming one more unit of a good or service relative to its cost.

Consumer Choice

The decision-making process by which individuals select and consume products or services to satisfy their desires and needs.