The risk premium for a risky consumption bundle is never larger than the difference between expected consumption

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The risk premium for a risky consumption bundle is never larger than the difference between expected consumption and the lowest payoff that occurs with a positive probability. Explain why this statement is true.

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Microeconomics

ISBN: 978-1118572276

5th edition

Authors: David Besanko, Ronald Braeutigam

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Question Posted: Mar 18, 2016 04:50 AM

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The risk premium for a risky consumption bundle is never larger than the difference between expected consumption

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The risk premium measures an individuals willingness to pay to avoid risk It ...View the full answer

Microeconomics

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