Given the Choice Between a Sure-Thing Option and a Gamble

question 59

Multiple Choice

Given the choice between a sure-thing option and a gamble option with the same expected payoff, a____________ person will choose gamble.

• A)risk averse
• B)risk loving
• C)risk neutral
• D)risk avoiding
• E)none of the above

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Definitions:

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the profitability of a business venture beyond basic operating costs.

Unimpeded Entry

A market condition where there are no barriers for new firms to enter and compete in the industry.

Purely Competitive Firm

A company that operates in a market where there are many buyers and sellers, none of which can influence market prices significantly.

Long Run

A period of time during which all factors of production and costs are variable, in contrast to the short run where some are fixed.