-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:

Monocultures

The agricultural practice of growing a single crop, plant, or livestock species in a field or farming system at a time, potentially reducing biodiversity.

Genetically Modified

Organisms whose genetic material has been altered using genetic engineering techniques.

Pesticides

Chemicals used to kill or control pests in agriculture, such as insects, weeds, or fungi, to protect crops and enhance productivity.

Environmental Degradation

The deterioration of the natural environment due to human activity, leading to the depletion of natural resources and loss of biodiversity.