Which of the Following Is True About a Risk-Averse Individual

question 4

Multiple Choice

Which of the following is true about a risk-averse individual facing a full menu of actuarily fair insurance contracts to choose from?

• A)The individual will "over-insure" if consumption is more meaningful in the good state.
• B)The individual will "over-insure" if consumption is more meaningful in the bad state.
• C)The individual will fully insure when tastes are state-independent.
• D)(a) and (b) are true.
• E)(a) and (c) are true.
• F)(b) and (c) are true.
• G)All of the above.
• H)None of the above.

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Definitions:

Released

The action of freeing someone or something from a constraint, obligation, or legal liability.

Obligations

Duties or commitments that an individual or entity is legally or morally bound to fulfill.

Executory Contract

An agreement between parties that has not yet been fully performed or completed by one or more parties.

Executed Contract

An executed contract refers to a legal agreement that has been fully performed, meaning all parties involved have fulfilled their contractual obligations.