A Risk-Averse Person Has a Utility Function That,with Income on the Horizontal

question 34

Multiple Choice

A risk-averse person has a utility function that,with income on the horizontal axis and utility on the vertical axis,as income increases:

• A) is a horizontal line.
• B) is a vertical line.
• C) has constant, positive slope.
• D) is increasing at a decreasing rate.
• E) is increasing at an increasing rate.

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Definitions:

Negative Affectivity

The state or trait tendency to experience nervousness, fear, anger, sadness, contempt, or guilt.

Nervousness

A feeling of agitation or anxiety, often experienced in anticipation of a stressful event or situation.

Behavioral Inhibition

In late infancy and childhood, a tendency towards shyness, manifested as avoidance or distress in new situations. This trait is linked to high reactivity (including irritability in response to new sensory stimulation) in early infancy.

Kindling-Sensitization Model

A theory suggesting that repeated exposures to stressful events may lead to an increased sensitivity to stress and eventually contribute to the onset of psychiatric disorders.