Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 6DQ
To determine
The risk averse nature towards a neutral result.
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Rue operates a food truck on Florida beaches, where she sells paninis and drinks, which she can sell for $8.00 and $4.00, respectively. Rue uses all of the money she makes to purchase theme park tickets, which cost $96.00, and her only other income comes from dividend payments of $32.00 from her investment portfolio. Let ?1 represent paninis, ?2 represent drinks, ? represent tickets, and ? represent dividend income. Complete Rue's budget equation: 8 ?1 + 4 ?2 + 32 = 96 ? Two of Rue's friends are coming to town,
Jin's Utility Function
Wealth
Utility
(Dollars)
60,000
4,000
61,000
4,110
62,000
4,209
63,000
4,288
Refer to Table 27-1. If Jin's current wealth is $61,000, then
O his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Jin is not risk
averse.
O his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Jin is not risk
averse.
O his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Jin is risk
averse.
his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Jin is risk averse.
3
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