A risk averse individual with initial wealth w0 and von-Neumann Morgensten utility function u(.) must decide whether and for how much to insure his car. The probability that he will have an accident and incur a dollar loss of L in damages is alpha (a positive number less than 1). One dollar of insurance may be purchased by paying an amount rho. We assume rho >alpha. Show that the optimal amount of insurance, x*, for a risk averse consumer is less than L