Economics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 24

You have two possessions you would like to insure against theft or damage: your new bicycle, which cost you $800, and a painting you inherited, which has been appraised at $55,000. The painting is more valuable, but your bicycle must be kept outdoors and is in much greater danger of being stolen or damaged. You can afford to insure only one item. Which should you choose? Why?