The Last $2,000 of Samantha's Wealth Adds Less to Her

question 128

Multiple Choice

The last $2,000 of Samantha's wealth adds less to her utility than the previous $2,000.Based on this information,Samantha has

• A)increasing marginal utility of wealth and is risk averse
• B)increasing marginal utility of wealth and is not risk averse
• C)decreasing marginal utility of wealth and is risk averse
• D)decreasing marginal utility of wealth and is not risk averse

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Definitions:

Interest Rate

The percentage charged on the total amount borrowed or earned on the total amount saved or invested.

Informationally Efficient

A characteristic of markets where all available information is already reflected in the prices of assets, ensuring that no participant can achieve consistent excess returns.

Fundamental Analysis

A method of evaluating a security by attempting to measure its intrinsic value, involving examination of related economic and financial factors.

Moral Hazard

The situation in which one party is more likely to take risks because another party bears the cost of those risks.