Your current disposable income is $10,000. There is a 10% chance you will get in a serious car accident, incurring damage of $1,900. (There is a 90% chance that nothing will happen.) Your utility function is $U = \sqrt { I }$ , where I is income. If this policy is priced at $40, what is the change in your expected utility if you purchase the policy rather than no insurance?
A) 1
B) 0.8
C) 0.2
D) 0

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The Answer of Your current disposable income is $10,000. There is a 10% chance you will get in a serious car accident, incurring damage of $1,900. (There is a 90% chance that nothing will happen.) Your utility function is $U = \sqrt { I }$ , where I is income. If this policy is priced at $40, what is the change in your expected utility if you purchase the policy rather than no insurance?
A) 1
B) 0.8
C) 0.2
D) 0

Your Current Disposable Income Is $10,000 U=IU = \sqrt { I }U=I​

Your Current Disposable Income Is $10,000 $U = \sqrt { I }$