For the following two questions, please use the following information: Sam's utility of wealth function is U(w) = 15 w. Sam owns and operates a farm. He is concerned that a flood may wipe out his crops. If there is no flood, Sam's wealth is $360,000. The probability of a flood is 1/10. If a flood does occur, Sam's wealth will fall to $160,000. Flood insurance, which would pay the loss in the event of a flood, is available for $30,000. Should Smith buy the insurance? a. Yes. b. No. C. Sam is indifferent. d. We need more information on Smith's attitude toward risk. 2. What is the maximum Sam would pay for the insurance? a. $10,000 b. $18,000 C. $20,000 d. $36,000 3. The short run is a. less than a year. b. three years. C. however long it takes to produce the planned output. d. a time period in which at least one input is fixed. 4. Any risk-averse individual would always a. take a 10% chance at $100 rather than a sure $10. b. take a 50% chance at $4 and a 50% chance at $1 rather than a sure $1. C. take a sure $10 rather than a 10% chance at $100. d. take a sure $1 rather than a 50% chance at $4 and a 50% chance at losing $1