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

Multiple Choice

-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 entirely destroyed, would this person buy a $20,000 insurance policy to replace the house if destroyed?

A) No, it is too expensive.
B) No, he is not risk averse.
C) Yes, the homeowner would pay even more.
D) Yes, this is the most the homeowner would pay.