Figure 14-1

question 266

Multiple Choice

Figure 14-1. The figure shows a utility function.
-Refer to Figure 14-1. The properties exhibited by this utility function help to explain various things we observe in the economy, including

• A)the risk-return tradeoff.
• B)insurance.
• C)diversification.
• D)All of the above are correct.

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Definitions:

Incremental Results

Outcomes or changes that are achieved step by step or gradually.

Externalities

Financial outcomes that impact third parties who are not directly involved, which can manifest as either advantageous or detrimental.

Economic Efficiency

Maximization of aggregate consumer and producer surplus.

Government Intervention

Actions undertaken by a government to influence or directly manage the economy, which can include regulations, subsidies, tariffs, and public services.