A Consumer Who Is Risk Averse Is Best Characterized as ________

question 103

Multiple Choice

A consumer who is risk averse is best characterized as ________.

• A) a consumer who may accept a risky prospect even if the expected gain is negative
• B) a consumer who demands a positive expected gain as compensation for taking risk
• C) a consumer who completely ignores risk and makes his or her decisions based solely on expected values
• D) None of the above

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Definitions:

Economic Value

The monetary worth of an asset, service, or company based on its ability to generate income or its utility.

Compounded Monthly

Interest that is compounded monthly accumulates interest on the principal amount on a monthly basis, effectively increasing the interest earned over time due to the compounding effect.

Lump Sum Payment

A large single payment made at a particular time, as opposed to multiple smaller payments.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's cost.