Suppose your classmate Cho offers you a wager: She will choose a playing card at random from a deck and pay you $3,000 if it is red, but you haveto pay her $3,000 if it is black. Assume your wealth is currently $9,000. The graph shown below plots your utility as a function of wealth. Use thegraph to answer the questions that follow.UTILITY (Units of utility)1009080605040302010003CXT²B9WEALTH (Thousands of dollars)12The shape of your utility function implies that you are athe difference in utility between B and A is15(2.)?individual, and, therefore, youthe difference between A and C.accept the wager becauseWhich of the following sentences most appropriately describe why the pain of losing $3,000 is greater than the joy of winning $3,000 for individualswho are risk averse? Check all that apply.Risk-averse people overestimate the probability of losing money.The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar.The utility function of a risk-averse person exhibits the law of diminishing marginal utility.Risk-averse people are relatively wealthy and simply do not need the additional money.

Suppose your classmate Cho offers you a wager: She will choose a playing card at random from a deck and pay you $3,000 if it is red, but you have to pay her $3,000 if it is black. Assume your wealth is currently $9,000. The graph shown below plots your utility as a function of wealth. Use the graph to answer the questions that follow. ITILITY (Units of utility) 100 90 80 70 60 50 GX + m ?

Suppose your classmate Cho offers you a wager: She will choose a playing card at random from a deck and pay you $3,000 if it is red, but you have to pay her $3,000 if it is black. Assume your wealth is currently $9,000. The graph shown below plots your utility as a function of wealth. Use the graph to answer the questions that follow. ITILITY (Units of utility) 100 90 80 70 60 50 GX + m ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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