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

question 155

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 completely destroyed, would this homeowner buy insurance?

• A) No, because the homeowner is not risk averse.
• B) Yes, at any price because the homeowner is risk averse.
• C) Yes, but only if it costs less than $10,000.
• D) Yes, but only if it costs less than $20,000.

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Definitions:

Distinct Personalities

Unique sets of characteristics, traits, and behaviors that differentiate one individual from another.

Sea Lions

Marine mammals characterized by external ear flaps, long foreflippers, and the ability to walk on all fours, belonging to the family Otariidae.

Monkeys

Primates that are not apes or humans, typically having tails and less developed brains compared to apes, and are known for their agility and social behaviors.

Trait Theorists

Psychologists who focus on identifying, describing, and measuring individual differences in behavioral predispositions.