A person who is willing to pay up to $2000 for insurance with a certain payoff of $4000 to replace a risky situation which would pay $2,000 some of the time and $4,000 other times is:

Question

Quizplus · Accepted Answer

The person is willing to pay a premium of up to $2000 for insurance to replace a risky situation that would pay $4000 (the maximum possible loss) some of the time and $2000 (the minimum possible loss) other times. This suggests that the person is risk averse and willing to pay a premium to avoid the risk of losing up to $4000.

A Person Who Is Willing to Pay Up to $2000