A farmer lives on a flat plain next to a river. In addition to the farm, which is worth $F, the farmer owns financial assets worth $A. The river bursts its banks and floods the plain with probability P, destroying the farm. If the farmer is risk averse, then the willingness to pay for flood insurance unambiguously falls when:
A) F is higher, and A is lower.
B) P is lower, and F is higher.
C) F & A are higher.
D) P is lower, and A is lower.
E) A is higher, and F is lower.

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The Answer of A farmer lives on a flat plain next to a river. In addition to the farm, which is worth $F, the farmer owns financial assets worth $A. The river bursts its banks and floods the plain with probability P, destroying the farm. If the farmer is risk averse, then the willingness to pay for flood insurance unambiguously falls when:
A) F is higher, and A is lower.
B) P is lower, and F is higher.
C) F & A are higher.
D) P is lower, and A is lower.
E) A is higher, and F is lower.

A Farmer Lives on a Flat Plain Next to a River