Matt's Utility Function If Matt's Current Wealth Is $51,000,then

question 371

Multiple Choice

Matt's Utility Function If Matt's current wealth is $51,000,then

• A) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000.Matt is risk averse.
• B) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000.Matt is not risk averse.
• C) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000.Matt is risk averse.
• D) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000.Matt is not risk averse.

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Definitions:

Insurance

A financial product offering protection against potential future losses or damages in exchange for a premium.

Uncertainty

The state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possible outcome.

Tuition

The fee charged for instruction or teaching, typically at a school, college, or university.

Expected Utility

The sum of the utilities associated with all possible outcomes, weighted by the probability that each outcome will occur.