Asked by Nicole Nagatoshi on Jul 03, 2024
Verified
(Table: Utility for Terri and Mary) Use Table: Utility for Terri and Mary.Each has an income of $300.If each were offered insurance to offset the risk of falling income,_____ would pay a larger premium because she is the consumer with _____ risk aversion.
A) Terri;more
B) Terri;less
C) Mary;more
D) Mary;less
Risk Aversion
The tendency to prefer certainty over uncertainty, avoiding risk in decision-making or preferring safer investments.
Insurance
A means of protection from financial loss, characterized by the transfer of risk from one entity to another in exchange for payment.
Consumer
An individual or group who purchases goods and services for personal use.
- Determining the elements that affect a person's readiness to pay for insurance coverage.
- Evaluating the relationship between risk aversion and insurance decision-making.
Verified Answer
ZK
Zybrea KnightJul 04, 2024
Final Answer :
A
Explanation :
According to the table, Terri has a higher level of risk aversion than Mary, which means she is willing to pay a higher premium for insurance to offset the risk of falling income. Therefore, Terri would pay a larger premium.
Learning Objectives
- Determining the elements that affect a person's readiness to pay for insurance coverage.
- Evaluating the relationship between risk aversion and insurance decision-making.
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