Steve owns a motorcycle valued at $5,000 and that is his only asset. There is a 5 percent chance that Steve will have an accident within a year. If he does have an accident, his motorcycle is worthless
Steve's utility of wealth curve is shown in the figure above. An insurance company agrees to pay Steve the full value of his motorcycle in case of an accident if he buys the company's insurance policy. The company's operating expenses are $500 per policy. What is the minimum premium that the insurance company will accept? A) $1,000
B) $2,000
C) $500
D) $1,500
A
You might also like to view...
A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.
Answer the following statement true (T) or false (F)
"The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have: a. no relationship
b. a negative slope. c. a positive slope. d. either positive or negative slope.
Refer to the information provided in Table 22.6 below to answer the question(s) that follow.
Table 22.6
Refer to Table 22.6. If 2014 is the base period, the price index in 2014 is
A. 1000. B. 100. C. 10. D. 1.
The benefits-received principle of taxation is not often used because
A. it leads to less equality in the after-tax distribution of income. B. it is difficult to determine the values individual taxpayers place on goods and services that are produced using tax revenue. C. it leads to an overproduction of public goods. D. if tax payments are linked to the benefits received, taxpayers tend to overstate the benefits that they receive from public goods.