When Jeff bought a house he also bought homeowners insurance, but when he bought a new dishwasher he refused to buy the repair insurance policy the store offered. Assuming Jeff is rational in his choices, which of the following is the most likely cause of his behavior?
A. The expected loss from dishwasher failure is less than the insurance premium and he can afford to absorb smaller losses.
B. The probability of his house burning is greater than the probability a dishwasher failure.
C. He switches back and forth between risk averse and risk loving preferences.
D. He doesn't trust appliance insurers because they have no agent to relate to.
Answer: A
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An increase in the discount rate impacts the money supply because it
a. makes it more attractive for commercial banks to borrow from the Federal Reserve. b. decreases the interest yield on new issues of U.S. securities. c. reduces the incentive of commercial banks to borrow from the Federal Reserve. d. increases the Federal Reserve's earnings and, thereby, expands the money supply.
The market system is an economic system that:
A. Produces more consumer goods than capital goods B. Produces more capital goods than consumer goods C. Gives private individuals the right to own resources used in production D. Emphasizes the government's power to control markets and direct economic activity