The Indifference Curves of Two Investors Are Plotted Against a Single

question 112

Multiple Choice

The indifference curves of two investors are plotted against a single budget line. Indifference curve A is shown as tangent to the budget line at a point to the left of indifference curve B's tangency to the same line.

• A) Investors A and B are equally risk averse.
• B) Investor A is more risk averse than investor B.
• C) Investor A is less risk averse than investor B.
• D) It is not possible to say anything about the risk aversion of the two investors, but they will hold the same portfolio.
• E) It is not possible to say anything about either the risk aversion or the portfolio of the two investors.

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Definitions:

Government Involvement

The participation or intervention by government entities in various sectors of the economy or specific activities.

Coase Theorem

A principle that suggests that if property rights are clearly defined and transaction costs are low, externalities can be efficiently resolved through private bargaining, regardless of who holds the rights.

Basic Rights

Fundamental entitlements and freedoms that are guaranteed to individuals, often protected by law or international treaties.

Impediments To Bargaining

Factors or conditions that obstruct or complicate the process of reaching a negotiation agreement.