Sally Kink Is an Expected Utility Maximizer with Utility Function

question 9

Multiple Choice

Sally Kink is an expected utility maximizer with utility function pu(c₁) = (1 - p) u(c₂) , where for any x < 1,000, u(x) = 2x, and for x greater than or equal to 1,000, u(x) = 2,000 + x.

• A)Sally will be risk averse if her income is less than $1,000 but risk loving if her income is more than $1,000.
• B)Sally will never take a bet if there is a chance that it leaves her with wealth less than $2,000.
• C)Sally will be risk neutral if her income is less than $1,000 and risk averse if her income is more than $1,000.
• D)For bets that involve no chance of her wealth exceeding $1,000, Sally will take any bet that has a positive expected net payoff.
• E)None of the above.

---

Definitions:

Dissociative Identity Disorder

A mental disorder characterized by the presence of two or more distinct personality states or identities in an individual.

Role Playing

A method or technique used in therapy, training, or studies, where people simulate behaviors, functions, or roles in structured scenarios to gain insights or skills.

Therapists

Professionals trained to help people understand and manage their mental health or emotional issues through various forms of therapy.

Biological Parents

The individuals from whom a child inherits their genetic traits, typically referred to as the child's natural or birth parents.