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-The Above Figure Shows the Utility of Wealth Curve for a Homeowner

Question 155

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-The above figure shows the utility of wealth curve for a homeowner whose only possession is a $50,000 house. If there is a 20 percent chance that the home could be completely destroyed, would this homeowner buy insurance? A) No, because the homeowner is not risk averse. B) Yes, at any price because the homeowner is risk averse. C) Yes, but only if it costs less than $10,000. D) Yes, but only if it costs less than $20,000.
-The above figure shows the utility of wealth curve for a homeowner whose only possession is a $50,000 house. If there is a 20 percent chance that the home could be completely destroyed, would this homeowner buy insurance?


A) No, because the homeowner is not risk averse.
B) Yes, at any price because the homeowner is risk averse.
C) Yes, but only if it costs less than $10,000.
D) Yes, but only if it costs less than $20,000.

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