ECO204Y5 Study Guide - Midterm Guide: Marginal Product, George Washington Gale, Frederick Law Olmsted
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(20 points total) daniel burnham and john root are the two talented chicago-based. Eco204: solutions to test 2 architects that have been given the task of building the 1893 chicago world"s fair. In addition to designing and overseeing the construction of the fair"s buildings, their job also requires them to decide whether they should purchase insurance to protect them against the loss of wealth. Explain your answer using two or three sentences. Based on their utility function, it is possible to conclude that burnham and root are willing to purchase insurance if the price is right because they are risk-averse individuals. Being exposed to risk causes their expected utility to be lower than their guaranteed utility. They are willing to trade-off some of their wealth to purchase the insurance in order to eliminate the possibility of great losses to wealth should an accident occur: (10 points) burnham and root currently don"t have insurance coverage.
