Author Question: Bruce Copperwood's utility of wealth curve is illustrated in the above figure. Bruce is presently ... (Read 125 times)

yoooooman · **on:** Jun 29, 2018

Bruce Copperwood's utility of wealth curve is illustrated in the above figure. Bruce is presently employed at a salary of 100,000. There is a 10 percent probability that Bruce will be totally disabled, in which case he will have no wealth.

An insurance company (with no operating expenses) would be willing to offer Bruce a disability insurance policy paying 100,000 in the case of total disability for a minimum premium of A) 1,000.
B) 10,000.
C) 20,000.
D) None of the above answers is correct.

Question 2

If your marginal rate of substitution between two goods diminishes continuously as you give up one good for the other, that means the

A) price per unit of one good declines when you buy it in larger and larger quantities.
B) two goods are perfect substitutes.
C) two goods are perfect complements.
D) two goods are neither perfect substitutes nor perfect complements.