Sally Kink Is an Expected Utility Maximizer with Utility Function

question 21

Multiple Choice

Sally Kink is an expected utility maximizer with utility function pu(c₁) + (1 - p) u(c₂) , where for any x < 1,000, u(x) = 2x, and for x greater than or equal to 1,000, u(x) = 2,000 + x.

• A) Sally will be risk averse if her income is less than $1,000 but risk loving if her income is more than $1,000.
• B) Sally will never take a bet if there is a chance that it leaves her with wealth less than $2,000.
• C) Sally will be risk neutral if her income is less than $1,000 and risk averse if her income is more than $1,000.
• D) For bets that involve no chance of her wealth exceeding $1,000, Sally will take any bet that has a positive expected net payoff.
• E) None of the above.

---

Definitions:

Supplier Selection

The process of assessing and choosing the most suitable suppliers based on criteria like cost, quality, service, and reliability.

Procurement

The process of obtaining goods and services, including the negotiation of terms, selection of suppliers, and the formal agreement of contracts.

Direct Materials

Raw materials that are directly incorporated into and can be directly traced back to a finished product in the manufacturing process.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.