Beachcomber Beatrice spent her entire wealth of $100,000 to build a beach house on the Gulf of Mexico. There is a 10 percent chance that the house will be totally destroyed by a hurricane

Beatrice's utility of wealth schedule is given in the table above. What is the minimum amount that the insurance company would require Beatrice to pay for an insurance policy that pays $100,000 if her beach house is destroyed by a hurricane? (Assume the insurance company has no other costs.) A) $10,000
B) $30,000
C) $40,000
D) $60,000


A

Economics

You might also like to view...

Public goods are not normally characterized by the following:

a. externalities b. market provision c. the free rider problem d. non-exclusion e. all the above characterize public goods

Economics

An example of an import of a service in the U.S. balance of payments would be when

A) an U.S. resident purchases a Japanese stereo. B) a Norwegian traveling in the United States rides a trolley car in San Francisco. C) a U.S. resident buying insurance from a firm in Toronto. D) a U.S. firm purchases 100 shares of a Dutch firm.

Economics

An outward shift in the demand curve for land will

a. make previously zero-rent land profitable. b. induce people to begin to use land more extensively. c. force reductions in rents. d. be accompanied by a shift in the supply of land.

Economics

In Africa, which of the following policies has been most successful at increasing elephant populations?

a. Banning the ivory trade by making the buying and selling of ivory illegal. b. Making elephants the common property of the people of the country through government ownership and control and making the killing of elephants illegal c. Allowing private ownership of elephants and making the ivory trade legal d. When used together, the policies in a and b have been more successful than the policy in c.

Economics