Jody and Douglas are risk-averse and both own residential homes worth $1,000,000. Douglas’s home is brick construction and is located in the Mohave Desert. Jody’s home is wood construction and is located in the San Bernardino national forest. If all owners of $1,000,000 residential properties must pay the same premium for fire insurance, explain which consumer, Jody or Douglas, is more likely to buy home insurance?
Ans - Jody is more likely to buy home insurance.
Explanation:
Jody’s home is wood construction and is located in the San Bernardino national forest, while Douglas’s home is brick construction and is located in the Mohave Desert.
Firstly woods are more prone to fire than bricks and also forest are more susceptible to fire in general than desert.
Also wood construction can easily be harmed with fire. In such case it is most likely that Jody will buy the insurance.
Jody and Douglas are risk-averse and both own residential homes worth $1,000,000. Douglas’s home is brick...
Jody and Douglas are risk-averse and both own residential homes worth $1,000,000. Douglas’s home is brick construction and is located in the Mohave Desert. Jody’s home is wood construction and is located in the San Bernardino national forest. If all owners of $1,000,000 residential properties must pay the same premium for fire insurance, explain which consumer, Jody or Douglas, is more likely to buy home insurance? i.) Does your answer above imply a market failure problem for the insurance company...
Jody and Douglas are risk-averse and both own residential homes worth $1,000,000. Douglas’s home is brick construction and is located in the Mohave Desert. Jody’s home is wood construction and is located in the San Bernardino national forest. (1)If all owners of $1,000,000 residential properties must pay the same premium for fire insurance, explain which consumer, Jody or Douglas, is more likely to buy home insurance? (2)Does your answer in above imply a market failure problem for the insurance company...
Jodyand Douglasare risk-averse and both own residential homes worth $1,000,000. Douglas’s home is brick construction and is located in the Mohave Desert. Jody’shome is wood construction and is located in the San Bernardino national forest. If all owners of $1,000,000 residential properties must pay the same premium for fire insurance, explain which consumer, Jody or Douglas, is more likely to buy home insurance?Does it imply a market failure problem for the insurance company and/or consumers of insurance?