Bob Invests $25 in an Investment That Has a 50

question 17

Multiple Choice

Bob invests $25 in an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0.From this information we can conclude that Bob is

• A) risk loving.
• B) risk neutral.
• C) risk averse.
• D) Any one of the three above.

---

Definitions:

Natural Monopoly

A market condition where the most efficient number of firms in the industry is one, due to the high infrastructure or fixed costs associated with distribution networks.

Willingness to Pay

The maximum amount an individual is prepared to spend on a good or service, reflecting the value they place on it.

Income

The extraction of financial value, repetitively over time, from working engagements or investment pursuits.

Income Elasticity

A measure of how much the demand for a good or service changes with a change in the consumer's income.