Your Current Disposable Income Is $10,000

question 30

Multiple Choice

Your current disposable income is $10,000.There is a 10% chance you will get in a serious car accident,incurring damage of $1,900.(There is a 90% chance that nothing will happen.) Your utility function is ,where I is income.What is the most you would be willing to pay for this policy (rather than no insurance) ?

• A) $100
• B) $190
• C) $199
• D) $270

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Definitions:

Conditioned Stimulus

An originally neutral stimulus that, after association with an unconditioned stimulus, comes to trigger a conditioned response.

Conditional Response

An acquired reflex to a stimulus initially neutral, after its frequent association with a stimulus that naturally invokes a response.

Rescorla

An influential figure in psychology known for his work on associative learning and conditioning, particularly the Rescorla-Wagner model of classical conditioning.

Stimulus Discrimination

The ability to differentiate between various stimuli, responding differently based on their distinct characteristics.