Alex, Who Is Risk-Neutral, Is Looking for an One-Bedroom Apartment

question 121

Multiple Choice

Alex, who is risk-neutral, is looking for an one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. Suppose Alex is risk-neutral. If the cost to Alex of searching for another apartment is $30, then will he search for another apartment?

• A)No, because searching for another apartment is a less-than-fair gamble.
• B)Yes, because searching for another apartment is a better-than-fair gamble.
• C)No, because searching for another apartment is a fair gamble.
• D)Yes, because searching for another apartment is a fair gamble.

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Definitions:

Unprotected Intercourse

Sexual activity without the use of contraceptives or protective measures, increasing the risk of sexually transmitted infections and unintended pregnancies.

Constrained

Restricted or limited in one's actions, freedoms, or capabilities.

Self-assured

Characterized by confidence and certainty in one's abilities or qualities, often leading to resilience and assertiveness.

Responsibility

The state or fact of having a duty to deal with something or of having control over someone.