A Decision Maker Has a Utility Function $U = I ^ { 2 } + 500$

question 10

Multiple Choice

A decision maker has a utility function $U = I ^ { 2 } + 500$ . This decision maker is

• A) risk-averse.
• B) risk-neutral.
• C) risk-loving.
• D) risk-gaining.

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Definitions:

Operating Assets

Assets that are used for the day-to-day operations of a business, intended to generate revenue.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the initial cost of the investment.

Direct Fixed Costs

Expenses that are consistent and directly tied to the production of goods or services but do not vary with the level of output.

Common Fixed Costs

Expenses that do not change with the volume of production or sales and are shared among multiple products or services within a company.