Question: An individual is facing a random loss X, which is uniformly distributed on (0,200) The individual can purchase partial insurance cover under which the insurer

An individual is facing a random loss X, which is uniformly

An individual is facing a random loss X, which is uniformly distributed on (0,200) The individual can purchase partial insurance cover under which the insurer will pay max(0, X - 60), and the premium for this cover is 85. The individual has wealth 250 and makes decisions on the basis of the utility function u(x) = x2/7 for x 0. 4. a. Show that the individual is risk averse. b. Will the individual purchase insurance cover? An individual is facing a random loss X, which is uniformly distributed on (0,200) The individual can purchase partial insurance cover under which the insurer will pay max(0, X - 60), and the premium for this cover is 85. The individual has wealth 250 and makes decisions on the basis of the utility function u(x) = x2/7 for x 0. 4. a. Show that the individual is risk averse. b. Will the individual purchase insurance cover

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