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

question 12

Multiple Choice

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

• A) is horizontal.
• B) is vertical.
• C) has constant, positive slope.
• D) is curved down.
• E) is curved up.

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Definitions:

Zero Economic Profits

A situation in perfectly competitive markets where firms earn just enough revenue to cover their total operating costs, leaving no supernormal profit.

Positive Economic Profits

The situation in which a firm's total revenues exceed its total costs, including both explicit and implicit costs, signaling that the firm is doing better than the next best alternative.

Profit

The financial gain realized when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Monopolistically Competitive Firm

A company that operates in a market with many competitors, each offering products that are similar but not identical, allowing for some degree of market power.