When Faced with an Insurance Policy Whose Premium Exceeds the Expected

question 27

Multiple Choice

When faced with an insurance policy whose premium exceeds the expected value of the claim:

• A)no one will buy it.
• B)only risk-tolerant individuals will buy it.
• C)risk-averse individuals will buy it as long as the utility associated with the insurance is greater than the expected utility without the insurance.
• D)risk-averse individuals will buy it as long as the utility associated with the insurance is less than the expected utility without the insurance.

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Definitions:

Resocialization

The process by which individuals learn new norms, values, attitudes, and behaviors to adapt to a new social role or environment.

Initiation Rites

These are ceremonial events or rituals that mark the admission of an individual into a new status or community, often involving tests or tasks to be completed.

Freud

Sigmund Freud was an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Ego

In psychology, it represents the part of the personality that deals with reality, operating on the reality principle to balance the desires of the id and the morals of the superego.