Business, 17.08.2019 20:20 voicelesstoxic

After superstorm sandy in 2012, the government offered subsidies to people whose houses were destroyed. how does the expectation that subsidies will be offered again for future disasters affect the probability that risk-averse people will buy insurance and the amount they buy? for example, assume there is a 3% chance of a hurricane that will completely destroy a home worth $200 comma 000. assume government subsidies will fully replace the value of homes destroyed by a hurricane. the expectation that subsidies will be offered again by the government to replace the value of homes destroyed by hurricanes will result in people a. buying the same amount of insurance because the subsidy does not affect the price of insurance. b. buying more insurance because the subsidy is received regardless of whether there is a hurricane. c. buying less insurance because the subsidy is at least partially insuring. d. buying more insurance because homeowners have more wealth with the subsidy. e. buying the same amount of insurance because the subsidy is only received when there is a hurricane.

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