Figure 19-3

question 178

Multiple Choice

Figure 19-3.The figure shows a utility function for Rob.
-Refer to Figure 19-3.If most people's utility functions look like Rob's utility function,then it is easy to explain why

• A) people buy various types of insurance.
• B) we observe a trade-off between risk and return.
• C) most people prefer to hold diversified portfolios of assets to undiversified portfolios of assets.
• D) None of the above are correct.

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Definitions:

Affiliation Needs

The psychological requirement for friendship, acceptance, and belonging within a group or community.

Esteem Needs

Psychological requirements relating to self-worth, accomplishment, respect, and recognition, as outlined in Maslow's hierarchy of needs.

Self-Actualization

The achievement of realizing one's talents and potential, seen as an innate drive or necessity in all individuals.

Affiliation Needs

A psychological need to feel a sense of involvement and "belonging" within a social group, where relationships play a significant role in personal identity.