0039WEALTH (Thousands of dollars)612The shape of your utility function implies that you are athe difference in utility between A and C is15individual, and, therefore, youthe difference between C and B.Which 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.The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar.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.accept the wager becauseThe utility function of a risk-averse person exhibits the law of diminishing marginal utility. Suppose your classmate Tim offers you a wager: He will choose a playing card at random from a deck and pay you $3,000 if it is red, but you have topay him $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 graphto answer the questions that follow.UTILITY (Units of utility)1009080706050403020100032+6U+9B?

Risk aversion: Risk aversion refers to the characteristic of an individual that refers to his…

Suppose your classmate Tim offers you a wager: He will choose a playing card at random from a deck and pay you $3,000 if it is red, but you have to pay him $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. UTILITY (Units of utility) 100 90 80 70 60 50 40 30 20 10 0 с + B + ?

Suppose your classmate Tim offers you a wager: He will choose a playing card at random from a deck and pay you $3,000 if it is red, but you have to pay him $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. UTILITY (Units of utility) 100 90 80 70 60 50 40 30 20 10 0 с + B + ?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

0
0
3
9
WEALTH (Thousands of dollars)
6
12
The shape of your utility function implies that you are a
the difference in utility between A and C is
15
individual, and, therefore, you
the difference between C and B.
Which of the following sentences most appropriately describe why the pain of losing $3,000 is greater than the joy of winning $3,000 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.
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.
accept the wager because
The utility function of a risk-averse person exhibits the law of diminishing marginal utility.

Suppose your classmate Tim offers you a wager: He will choose a playing card at random from a deck and pay you $3,000 if it is red, but you have to
pay him $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.
UTILITY (Units of utility)
100
90
80
70
60
50
40
30
20
10
0
0
32
+
6
U
+
9
B
?

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