(Answered) If a homeowner doesnrsquot buy homeownerrsquos insurance he

Economics

If a homeowner doesn’t buy homeowner’s insurance, he or she must be risk-loving.

If a person is willing to pay a maximum of $750 to insure against a loss of $28,000 that will occur with 2.5% probability, then he or she is risk-averse.

Given the choice, a risk-averse person would be more willing to toss a coin twice and receive $1 each time tails comes up than to a coin once and receive $2 if tails come up.

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