Question: We have the utility function utility = In(wealth) Your wealth is $5000 Of that wealth, $2000 is your house You face a 5% chance of

We have the utility function utility = In(wealth) Your wealth is $5000 Of that wealth, $2000 is your house You face a 5% chance of a natural disaster that will destroy your house You can insure the house at a cost of the expected value of the loss plus $10 The insurance would restore your house to its original value of $2000 Determine: without insurance with insurance 1 E(wealth) 2 E(utility) 4

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