Author Question: John's utility of wealth curve is shown in the above figure. He currently has wealth of 20,000, and ... (Read 125 times)

james9437 · **on:** Jun 29, 2018

John's utility of wealth curve is shown in the above figure. He currently has wealth of 20,000, and there is a 25 percent chance that he could lose it all. If an insurance company offers to insure against this loss for 6,000, John will

A) buy the policy.
B) not buy the policy.
C) be indifferent between being insured and uninsured.
D) There is not enough information to answer.

Question 2

In the above figure, curve D slopes downward because

A) average fixed costs decrease as output increases.
B) all costs decrease as output increases.
C) there are diminishing returns.
D) there are decreasing marginal costs.