If fair insurance is offered to a risk-averse person, she will
A) buy enough insurance to eliminate all risk.
B) not buy any insurance because it is overpriced.
C) not buy any insurance since the marginal utility of the amount of the payment is positive.
D) buy enough insurance to cover about half of the possible loss.
A
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At point d in the above figure, the average product of labor equals
A) 15. B) 4. C) 3.75. D) approximately 1.
In the two-period model with limited commitment, if the collateral constraint binds
A) increases in the present value of collateral increase current consumption and reduce future consumption. B) increases in the present value of collateral increase current consumption one-for-one. C) increases in the present value of collateral decrease current consumption and increase future consumption. D) increases in the present value of collateral increase current consumption less than one-for-one.