Zoe, who is risk averse, purchased flight cancellation insurance which will cover the cost of her non-refundable $500 airline ticket if she is unable to travel due to illness. Zoe faces a 10 percent probability of becoming ill and then using the insurance. a) The fair insurance premium (i. e., selling price) for this insurance is $450. b) Zoe's maximum willingness to pay for the insurance is $50. c) Zoe's personal risk premium must exceed the actuarially fair price. d) None of the above.
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