Which of the following is true about an individual's choice of insurance assuming state-independent tastes?
A. Full insurance will be chosen from a full menu of actuarily fair insurance if tastes are risk averse.
B. No insurance will be chosen if the menu of insurance contracts is actuarily unfair and tastes are risk averse.
C. No insurance will be chosen if the menu of insurance contracts is actuarily unfair and tastes are risk-neutral.
D. (a) and (b) are true.
E. (a) and (c) are true.
F. (b) and (c) are true.
G. All of the above.
H. None of the above
Answer: E
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The international capital market is
A) the place where you can rent earth moving equipment anywhere in the world. B) a set of arrangements by which individuals and firms exchange money now for promises to pay in the future. C) the arrangement where banks build up their capital by borrowing from the Central Bank. D) the place where emerging economies accept capital invested by banks. E) exclusively concerned with the debt crisis that ended in the 1990s.
After 1979 there was an upsurge in labor productivity growth in the U.S. ________ sector, mainly coming from the ________ industry
A) manufacturing, computer B) manufacturing, machine tool C) nonmanufacturing, edible oil D) nonmanufacturing, financial services E) nonmanufacturing, book publishing
According to the AK growth model, taxes on corporate income and capital gains ________ the incentive for firms to accumulate capital and ________ the steady-state growth rate
A) increase; increase B) reduce; reduce C) increase; do not change D) reduce; do not change
Dorothy lives in a city with high air pollution. Pollution is a bad, but she is able to avoid air pollution by wearing a face mask. Her preferences are given by
U(q1,q2 ) = (q1 - P)2q22 where q1 is the amount of time she spends wearing a mask, P is the amount of pollution and q2 is a composite of other goods (p2 = 1 ). Dorothy must decide how much to wear a mask and how much q2 to purchase. The price of masks is pM. Assume q1* > P when answering this question. a. Derive Dorothy's demand for masks, q1*(p1,Y, P) b. How does the quantity of pollution affect the demand for masks? That is, find q1*/P. c. How does her income influence the quantity of masks she purchases? That is, find q1*/Y. d. What condition must hold for the assumption q1* > P to hold?