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14. Arendelle Capital, an insurance company, is willing to sell Kristoff cold-summer insurance and promises to pay him $5,000 if the summer is cold and the business fails. Is Kristoff willing to pay $1,000 for the insurance? Is Kristoff willing to pay $2,000 for the insurance? (A) Kristoff is willing to pay $1,000, even $2,000 for the insurance. (B) Kristoff is only willing to pay $1,000, not $2,000 for the insurance. (C) It is not worth it for Kristoff to purchase either insurance. (D) There is no way that an insurance company can lower the risk for Elsa to start snow storms, so it is not worth it for Kristoff to purchase any insurance.

13. What is his expected wealth and utility respectively? (A) $3,000, 120 (B) $2,000, 90 (C) $3,000, 90 (D) $2,000, 60

12. Wedding events are not mandatory because couples can simply marry at the district offices. Based on the observation, wedding events are (A) a luxury good and their income elasticity of demand is greater than 1 (B) a luxury good and their income elasticity of demand is less than 1 (C) a necessity good and their income elasticity of demand is greater than 1 (D) a necessity good and their income elasticity of demand is less than 1 | Wealth (dollars) | Utility (units) | | --- | --- | | 5,000 | 150 | | 4,000 | 140 | | 3,000 | 120 | | 2,000 | 90 | | 1,000 | 50 | | 0 | 0 | (Question 13-14) On the above is Kristoff's utility of wealth schedule. Kristoff's wealth is $5,000 and it consists entirely of his share in a risky ice harvesting business. If the summer is cold, the business will fail, and he will have no wealth. Where Kristoff lives there is a 40 percent chance each year that Elsa will start snow storms and then the summer will be cold.

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