Use the following to answer question:
-(Table: Utility for Terri and Mary)Use Table: Utility for Terri and Mary.Each has an income of $300.If each were offered insurance to offset the risk of falling income,_____ would pay a larger premium because she is the consumer with _____ risk aversion.
A)Terri;more
B)Terri;less
C)Mary;more
D)Mary;less

Question

Use the following to answer question: 
-(Table: Utility for Terri and Mary)Use Table: Utility for Terri and Mary.Each has an income of $300.If each were offered insurance to offset the risk of falling income,_____ would pay a larger premium because she is the consumer with _____ risk aversion.
A)Terri;more 
B)Terri;less 
C)Mary;more 
D)Mary;less

Quizplus · Accepted Answer

According to the table, Terri has a higher level of risk aversion than Mary, which means she is willing to pay a higher premium for insurance to offset the risk of falling income. Therefore, Terri would pay a larger premium.

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