SOLVED

31) John’s utility of wealth curve is shown in the above figure. He currently has wealth of $20,000. If the state lottery offers a 1 in 10,000 chance of winning $10,000, John will A) pay whatever price it takes to play. B) pay $1 to play this game. C) pay less than $1 to play this game. D) not be willing to play this game at any price. 32) John’s utility of wealth curve is shown in the above figure. He currently has total wealth of $20,000. If there is a 50 percent chance that his $10,000 car will be stolen, then his expected wealth equals A) $0. B) $10,000. C) $15,000. D) $20,000. 33) John’s utility of wealth curve is shown in the above figure. He currently has total wealth of $20,000. If there is a 50 percent chance that his $10,000 car will be stolen, what is the value of insurance against the theft? A) $0 B) $5,000 C) $7,000 D) $13,000 34) John’s utility of wealth curve is shown in the above figure. He currently has wealth of $20,000. If there is a 10 percent chance that he could lose all his wealth, what is his expected wealth? A) $0 B) $2,000 C) $17,000 D) $18,000 35) John’s utility of wealth curve is shown in the above figure. He currently has wealth of $20,000. If there is a 10 percent chance of losing all his wealth, what is the value of insurance against this loss? A) $0 B) $2,000 C) $3,000 D) $17,000 36) John’s utility of wealth curve is shown in the above figure. He currently has wealth of $20,000 and there is a 10 percent chance of losing it all. John is A) willing to pay any price for insurance. B) willing to pay no more than $2,000 for insurance. C) willing to pay no more than $3,000 for insurance. D) willing to pay $5,000 for insurance. 37) John’s utility of wealth curve is shown in the above figure. He currently has wealth of $20,000, and there is a 25 percent chance that he could lose it all. If an insurance company offers to insure against this loss for $6,000, John will A) buy the policy. B) not buy the policy. C) be indifferent between being insured and uninsured. D) There is not enough information to answer. 38) Andrew has the utility of wealth curve shown in the above figure. He owns an SUV worth $30,000, and that is his only wealth. There is a 10 percent chance that he will have an accident within a year. If he does have an accident, his SUV is worthless. What is Andrew’s expected wealth? A) $30,000 B) $27,000 C) $20,000 D) zero 39) Andrew has the utility of wealth curve shown in the above figure. He owns an SUV worth $30,000, and that is his only wealth. There is a 10 percent chance that he will have an accident within a year. If he does have an accident, his SUV is worthless. What is Andrew’s expected utility? A) 100 B) 90 C) 50 D) zero 40) Andrew has the utility of wealth curve shown in the above figure. He owns an SUV worth $30,000, and that is his only wealth. There is a 10 percent chance that he will have an accident within a year. If he does have an accident, his SUV is worthless. Andrew would have the same expected utility as he currently has if his wealth was ________ and he faced no uncertainty. A) $30,000 B) $27,000 C) $21,000 D) $18,000