TSuppose your classmate Gilberto offers you a wager: He will choose a playing card at random from a deck and pay you $1,000 if it is red, but youhave to pay him $1,000 if it is black. Assume your wealth is currently $3,000. The graph shown below plots your utility as a function of wealth. Usethe graph to answer the questions that follow.100ipsips88888UTILITY (Units of utility)++23WEALTH (Thousands of dollars)+(?The shape of your utility function implies that you are athe difference in utility between C and A isindividual, and, therefore, yourence between A and B.risk-friendlyaccept the wager becauseWhich of the following sentences most appropriately des risk-averse pain of losing $1,000 is greater than the joy of winning $1,000 for individualswho are risk averse? Check all that apply.The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar.The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar.Risk-averse people are relatively poor and cannot afford to lose any money.The utility function of a risk-averse person exhibits the law of diminishing marginal utility.

Risk aversion is a concept of behavioral economics that analyzes the tendency of people with risk…

Suppose your classmate Gilberto offers you a wager: He will choose a playing card at random from a deck and pay you $1,000 if it is red, but you have to pay him $1,000 if it is black. Assume your wealth is currently $3,000. The graph shown below plots your utility as a function of wealth. Use the graph to answer the questions that follow. 100 UTILITY (Units of utility) 8 8 8 8 8 & 2 ° + * ° 1 2 3 WEALTH (Thousands of dollars) (?) The shape of your utility function implies that you are a the difference in utility between C and A is individual, and, therefore, you rence between A and B. accept the wager because risk-friendly Which of the following sentences most appropriately des risk-averse pain of losing $1,000 is greater than the joy of winning $1,000 for individuals who are risk averse? Check all that apply. The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar. The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar. Risk-averse people are relatively poor and cannot afford to lose any money. The utility function of a risk-averse person exhibits the law of diminishing marginal utility.

Suppose your classmate Gilberto offers you a wager: He will choose a playing card at random from a deck and pay you $1,000 if it is red, but you have to pay him $1,000 if it is black. Assume your wealth is currently $3,000. The graph shown below plots your utility as a function of wealth. Use the graph to answer the questions that follow. 100 UTILITY (Units of utility) 8 8 8 8 8 & 2 ° + * ° 1 2 3 WEALTH (Thousands of dollars) (?) The shape of your utility function implies that you are a the difference in utility between C and A is individual, and, therefore, you rence between A and B. accept the wager because risk-friendly Which of the following sentences most appropriately des risk-averse pain of losing $1,000 is greater than the joy of winning $1,000 for individuals who are risk averse? Check all that apply. The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar. The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar. Risk-averse people are relatively poor and cannot afford to lose any money. The utility function of a risk-averse person exhibits the law of diminishing marginal utility.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

T
Suppose your classmate Gilberto offers you a wager: He will choose a playing card at random from a deck and pay you $1,000 if it is red, but you
have to pay him $1,000 if it is black. Assume your wealth is currently $3,000. The graph shown below plots your utility as a function of wealth. Use
the graph to answer the questions that follow.
100
ips
ips
88888
UTILITY (Units of utility)
+
+
2
3
WEALTH (Thousands of dollars)
+
(?
The shape of your utility function implies that you are a
the difference in utility between C and A is
individual, and, therefore, you
rence between A and B.
risk-friendly
accept the wager because
Which of the following sentences most appropriately des risk-averse pain of losing $1,000 is greater than the joy of winning $1,000 for individuals
who are risk averse? Check all that apply.
The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar.
The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar.
Risk-averse people are relatively poor and cannot afford to lose any money.
The utility function of a risk-averse person exhibits the law of diminishing marginal utility.

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