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corie corie
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Posts: 767
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7 years ago
Smith just bought a house for $250,000.  Earthquake insurance, which would pay $250,000 in the event of a major earthquake, is available for $25,000.  Smith estimates that the probability of a major earthquake in the coming year is 10 percent, and that in the event of such a quake, the property would be worth nothing.  The utility (U) that Smith gets from income (I) is given as follows:
   U(I) = I0.5.   
Should Smith buy the insurance?
A) Yes.
B) No.
C) Smith is indifferent.
D) We need more information on Smith's attitude toward risk.
Textbook 
Microeconomics

Microeconomics


Edition: 8th
Author:
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CanihCanih
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#1
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7 years ago
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corie Author
wrote...

7 years ago
I appreciate what you did here, answered it right Smiling Face with Open Mouth
lierac00
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Yesterday
Smart ... Thanks!
logbi
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2 hours ago
Correct Slight Smile TY
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