According to John Nyman, the Reduction in Utility Due to the Payment

question 15

Multiple Choice

According to John Nyman, the reduction in utility due to the payment of an insurance premium when healthy is less than the increase in utility from an equal income transfer when ill. Which of the following best explains why this is true?

• A) As incomes increase, people gain greater utility from additional income.
• B) When sick, people no longer behave rationally.
• C) As incomes decrease, people gain greater utility from additional income.
• D) When healthy, people are able to get more enjoyment from their income.
• E) John Nyman is incorrect.

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Definitions:

Sensorimotor Period

The first stage in Piaget's theory of cognitive development, ranging from birth to approximately 2 years of age, where infants learn through sensory experiences and manipulating objects.

World Around Them

The environment and circumstances in which individuals live and interact, encompassing both physical and social aspects.

Secondary Circular Reactions

Repetitive actions in infant development focused on external objects, marking a key phase in the sensorimotor period where the child begins to interact more with their environment.

Primary Circular Reactions

A term from Piaget's theory referring to the first habits and reflexes in infants, where they discover by chance and repeat actions centered on their own body.