If a Person Is Risk Averse

question 64

Multiple Choice

If a person is risk averse:

• A)the certainty equivalent of a gamble is equal to the expected value of the gamble.
• B)the certainty equivalent of a gamble is lower than the expected value of the gamble.
• C)the certainty equivalent of a gamble is higher than the expected value of the gamble.
• D)cannot be compared to the expected value of the gamble.

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Definitions:

Money-Based Trade

Transactions involving the exchange of goods or services for money, as opposed to barter trade, where goods are exchanged directly for other goods.

Consumer Sovereignty

The concept that consumers have the ultimate control over the goods and services produced by economies based on their preferences and spending choices.

Market System

An economic organization where choices relating to the investment in, production of, and distribution of goods and services are influenced by supply and demand dynamics, and where the prices are freely set in an open market pricing system.

Consumers Buy

Consumers buy refers to the action of individuals or households purchasing goods and services for personal use, driven by preferences, income, and prices.