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.

---

Definitions:

Direct Material Costs

The cost of raw materials directly used in the production of goods.

Predetermined Rate

A rate established before the start of a project or period, often used in budgeting and costing, to assign overhead costs to specific activities.

First-In, First-Out

An accounting method for valuing inventory which assumes that the first items purchased are the first ones sold.

Direct Labor

Labor costs that are directly tied to the production of goods or the provision of services, such as wages of factory workers.