Sally Kink Is an Expected Utility Maximizer with Utility Function

question 12

Multiple Choice

Sally Kink is an expected utility maximizer with utility function pu(c₁) + (1 - p) u(c₂) , where for any x < 6,000, u(x) = 2x, and for x greater than or equal to 6,000, u(x) = 12,000 + x.

• A) Sally will be risk neutral if her income is less than $6,000 and risk averse if her income is more than $6,000.
• B) Sally will be risk averse if her income is less than $6,000 but risk loving if her income is more than $6,000.
• C) For bets that involve no chance of her wealth exceeding $6,000, Sally will take any bet that has a positive expected net payoff.
• D) Sally will never take a bet if there is a chance that it leaves her with wealth less than $12,000.
• E) None of the above.

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Definitions:

Isometric

Pertaining to exercises or muscle actions in which tension is developed without contraction of the muscle.

Resistive Isometric

Exercise involving muscle contractions without movement, typically used to increase muscle strength without straining the joints.

Joint Degeneration

The gradual deterioration of joint function and structure, often associated with conditions like osteoarthritis.

Arthritis

A condition causing inflammation, pain, and stiffness in the joints, often leading to reduced mobility and quality of life.