Alex, Who Is Risk-Neutral, Is Looking for a One-Bedroom Apartment

question 122

Multiple Choice

Alex, who is risk-neutral, is looking for a one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. Suppose Alex is risk-neutral. If the cost to Alex of searching for another apartment is $30, then will he search for another apartment?

• A)No, because searching for another apartment is a less-than-fair gamble.
• B)Yes, because searching for another apartment is a better-than-fair gamble.
• C)No, because searching for another apartment is a fair gamble.
• D)Yes, because searching for another apartment is a fair gamble.

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Definitions:

Alimentary Canal

The digestive tract from the mouth to the anus, including all the organs involved in digestion and absorption.

Submucosa

The layer of the alimentary canal located between the mucosa and the muscular layer.

Nutrients

Substances obtained from food and used by our bodies for growth, energy, and maintaining health.

Mucus

A sticky, slimy substance produced by mucous membranes in the body, acting as a lubricant and protective barrier against foreign particles and microbes.