An individual must choose between 4 insurance policies, $x_{1}, x_{2}, x_{3}, x_{4}$, where $x_{1}$ is the company's default option. The utility the individual receives from each option is ordered the following way: $u\left(x_{3}\right)u\left(x_{1}\right) \geq u\left(x_{2}\right)u\left(x_{4}\right)$. Which option does the individual choose?
A) $x_{1}$
B) $x_{2}$
C) $x_{3}$
D) $x_{4}$

Question

An individual must choose between 4 insurance policies, $x_{1}, x_{2}, x_{3}, x_{4}$, where $x_{1}$ is the company's default option. The utility the individual receives from each option is ordered the following way: $u\left(x_{3}\right)>u\left(x_{1}\right) \geq u\left(x_{2}\right)>u\left(x_{4}\right)$. Which option does the individual choose?
A) $x_{1}$
B) $x_{2}$
C) $x_{3}$
D) $x_{4}$

Quizplus · Accepted Answer

Given the utility ordering $u(x_{3}) > u(x_{1}) \geq u(x_{2}) > u(x_{4})$, the individual will choose $x_{3}$ because it provides the highest utility.

An Individual Must Choose Between 4 Insurance Policies x1,x2,x3,x4x_{1}, x_{2}, x_{3}, x_{4}x1​,x2​,x3​,x4​

An Individual Must Choose Between 4 Insurance Policies $x_{1}, x_{2}, x_{3}, x_{4}$