Many residents of the city of Adelphia drive without automobile insurance. Assuming that Adelphia is just like any other city and these are risk averse individuals, which of the following is most likely TRUE?
A) Economic models do not work.
B) These people maximize wealth.
C) The price of automobile insurance exceeds their maximum value of insurance.
D) There are no automobile accidents or thefts in the city of Adelphia.

Question

Quizplus · Accepted Answer

Risk-averse individuals would typically purchase insurance unless the cost of insurance is perceived to be higher than the value they place on it.

Many Residents of the City of Adelphia Drive Without Automobile