Consider an individual whose utility function over income I is U(I), where U is increasing smoothly in
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Consider an individual whose utility function over income I is U(I), where U is increasing smoothly in I (U'>0) and convex (U''>0)
(a) Draw a utility function in U−I space that fits this description.
(b) Explain the connection between U’’ and risk aversion.
(c) True or false: this individual prefers no insurance to an actuarially fair, full contract.
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