People buying insurance aim to shift consumption from periods when consumption is ___________ to periods when consumption is ___________ and marginal utility is relatively ___________.

Question

Quizplus · Accepted Answer

People buying insurance aim to shift consumption from periods when consumption is high (i.e. when a negative event occurs that requires insurance coverage) to periods when consumption is low (i.e. when no negative event occurs and insurance coverage is not needed). Therefore, the answer must include a choice with "high" and "low". Additionally, people buying insurance aim to have a relatively high marginal utility in the periods after a negative event occurs, which is captured by choice B (high consumption during a negative event leads to low marginal utility).

People Buying Insurance Aim to Shift Consumption from Periods When