A Given Person Is Risk Neutral Through All Relevant Levels

question 38

Multiple Choice

A given person is risk neutral through all relevant levels of income.This person, facing the prospect of receiving an extra $5,000 with probability 0.5 and losing $5,000 with probability 0.5, would be willing to buy:

• A)more insurance to avoid the risk than if the probabilities were 0.25 and 0.75 of receiving the extra $5,000 and losing $5,000, respectively.
• B)less insurance to avoid the risk than if the probabilities were 0.25 and 0.75 of receiving the extra $5,000 and losing $5,000, respectively.
• C)the same amount of insurance to avoid the risk than if the probabilities were 0.25 and 0.75 of receiving the extra $5,000 and losing $5,000, respectively.
• D)no insurance to avoid the risk even if the probabilities were 0.25 and 0.75 of receiving the extra $5,000 and losing $5,000, respectively.
• E)up to $10,000 in insurance if the probability of loss were sufficiently high.

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Definitions:

Labour Market Segmentation

Labour market segmentation refers to the division of the labour market into distinct sub-groups, where different rules, wages, and opportunities apply, often based on factors like industry, occupation, age, or gender.

Labour Homogenization

The process of making a workforce more uniform in skills and characteristics, often due to technological, educational, or policy changes.

Occupational Structure

The arrangement and distribution of jobs and careers within a society, including patterns of segregation or hierarchy.

Underclass Of The Occupational Hierarchy

Refers to individuals in the lowest stratum of the occupational structure, often characterized by low-income jobs with little to no possibility of upward mobility.