Which of the following is true about an individual's choice of insurance assuming state-independent tastes?
A. Full insurance will be chosen from a full menu of actuarily fair insurance if tastes are risk averse.
B. No insurance will be chosen if the menu of insurance contracts is actuarily unfair and tastes are risk averse.
C. No insurance will be chosen if the menu of insurance contracts is actuarily unfair and tastes are risk-neutral.
D. (a) and (b) are true.
E. (a) and (c) are true.
F. (b) and (c) are true.
G. All of the above.
H. None of the above
Answer: E
You might also like to view...
If investment demand increases, the equilibrium real interest rate ________ and the equilibrium quantity of investment ________
A) rises; decreases B) falls; decreases C) falls; increases D) rises; increases E) does not change; does not change
Amalgamated Widget Company is currently considering which investment projects it should undertake. The following list of projects along with the estimated rate of return of each project is presented to the executive management team:Project A (9%)Project B (7.5%)Project C (6.5%)Project D (11%)Project E (5.5%)The current interest rate in the loanable funds market is 6%. However, if an increase in government borrowing pushes the interest rate to 8%, we would expect the company to undertake ________ projects.
A. four B. five C. two D. three