Arthur is choosing whether to buy insurance against the risk of theft of car. He has...

Arthur is choosing whether to buy insurance against the risk of theft of car. He has savings of $64,000. His utility function over income x is u(x) = x^1/3. If his car is stolen and he does not have insurance, he will need to pay $9128 for another car. A company offers full insurance that will pay out $9128 if the car is stolen. What is the highest price Arthur will be willing to pay for the insurance (round to the nearest dollars) if the probability of having his car stolen is 0.1?

Group of answer choices

$2837

$1019

$1300

$955

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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