Use the following to answer question:
Figure: Risk Aversion
-(Figure: Risk Aversion)Use Figure: Risk Aversion.Bob and Nancy have the same income and total utility.Nancy will be willing to pay a _____ insurance premium than is Bob because she is _____ risk-averse.
A)higher;more
B)lower;more
C)lower;less
D)higher;less

Question

Use the following to answer question:
Figure: Risk Aversion 
-(Figure: Risk Aversion)Use Figure: Risk Aversion.Bob and Nancy have the same income and total utility.Nancy will be willing to pay a _____ insurance premium than is Bob because she is _____ risk-averse.
A)higher;more 
B)lower;more 
C)lower;less 
D)higher;less

Quizplus · Accepted Answer

According to the figure, as the degree of risk-aversion increases, the amount of insurance premium willing to pay also increases. Therefore, Nancy, who is more risk-averse than Bob, will be willing to pay a higher insurance premium than Bob.

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