Suppose Someone Knew That the Probability of Incurring a $10,000

question 61

Multiple Choice

Suppose someone knew that the probability of incurring a $10,000 medical expense was 5% and the odds of being healthy and incurring no expenses was 95%. If they used that information to compare the expected cost to them ($500) with the $500 premium it would cost to get full coverage and decided to buy the insurance but only if the price went no higher then economists would say they are

• A)irrational.
• B)risk loving.
• C)risk averse.
• D)risk neutral.

---

Definitions:

Crawling Experience

Refers to the phase in early child development where infants learn to move on their hands and knees, which is crucial for motor skills development.

Infants

Young babies, typically those under one year of age, who are in the very early stages of development.

Linear Perspective

A technique in art and photography that creates the illusion of depth on a flat surface by converging parallel lines towards a single point in the distance.

Seeming Convergence

The appearance or impression of things coming together or becoming more similar over time.