Individuals differ in risk aversion for which of the following reasons?
A)adverse selection
B)moral hazard
C)differences in income or wealth
D)differences in their insurance

Question

Quizplus · Accepted Answer

Risk aversion is known to vary with differences in income or wealth. People with higher incomes are generally less risk-averse than those with lower incomes because they have higher financial buffers and can afford to take on more risk. Similarly, people with more wealth may also be less risk-averse because they can afford to lose some of their wealth without significant consequences. Adverse selection and moral hazard are not reasons why individuals differ in risk aversion, but rather refer to problems that can arise in insurance markets. Differences in insurance are also not a reason why individuals differ in risk aversion, but rather reflect differences in their willingness to pay for insurance.

Individuals Differ in Risk Aversion for Which of the Following