Use the following to answer questions:
-(Table: Total Utility of Income After College Expenses) Look at the table Total Utility of Income After College Expenses. Mr. and Mrs. Smith would be willing to pay as much as _____ for insurance to pay their daughter's tuition and eliminate the uncertainty in the family's income after tuition.
A) $12,000
B) $10,000
C) $8,000
D) $5,000

Question

Use the following to answer questions: 
-(Table: Total Utility of Income After College Expenses) Look at the table Total Utility of Income After College Expenses. Mr. and Mrs. Smith would be willing to pay as much as _____ for insurance to pay their daughter's tuition and eliminate the uncertainty in the family's income after tuition.
A) $12,000 
B) $10,000 
C) $8,000 
D) $5,000

Quizplus · Accepted Answer

Mr. and Mrs. Smith would be willing to pay as much as $12,000 for insurance to pay their daughter's tuition and eliminate the uncertainty in the family's income after tuition. This is because the expected value of the insurance is $12,000, which is the amount they would receive if they purchased the insurance and their daughter's tuition was covered.

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