Demand for Insurance Comprehension Questions Indicate whether the statement is true or false,and justify your answer.Be sure to state any additional assumptions you may need. 1.In the model of insurance and uncertainty discussed in the chapter,an indi- vidual exhibits declining marginal utility of income if and only if she is risk averse. TRUE.Under this simple model the shape of the income-iliy curve de- one's taste for risk.If the individual exhibits declining mar uity of income,her income-utility curve will be concave and she will be risk averse. 2.A consumer with declining marginal utility of income will never prefer actu- arially fair partial insurance to actuarially unfair full insurance. FALSE.Even someone risk averse might forgo full insurance if it is too ex- pensive. 3.Risk-averse consumers always prefer insurance that is actuarially fair but cthat is ictuarially untair-but the opposite is true for FALSE.Consider uninsurance,which is technically actuarially fair but defi- nitely not full.Sometimes,risk-averse consumers will prefer full insurance to uninsurance,even if it is actuarially unfair. 1 7 Demand for Insurance Comprehension Questions Indicate whether the statement is true or false, and justify your answer. Be sure to state any additional assumptions you may need. 1. In the model of insurance and uncertainty discussed in the chapter, an indi￾vidual exhibits declining marginal utility of income if and only if she is risk averse. TRUE. Under this simple model, the shape of the income-utility curve de￾termines one’s taste for risk. If the individual exhibits declining marginal utility of income, her income-utility curve will be concave and she will be risk averse. 2. A consumer with declining marginal utility of income will never prefer actu￾arially fair partial insurance to actuarially unfair full insurance. FALSE. Even someone risk averse might forgo full insurance if it is too ex￾pensive. 3. Risk-averse consumers always prefer insurance that is actuarially fair but not full to full insurance that is actuarially unfair - but the opposite is true for risk-loving consumers. FALSE. Consider uninsurance, which is technically actuarially fair but defi- nitely not full. Sometimes, risk-averse consumers will prefer full insurance to uninsurance, even if it is actuarially unfair. 1