Sally Kink Is an Expected Utility Maximizer with Utility Function

question 23

Multiple Choice

Sally Kink is an expected utility maximizer with utility function pu(c₁) + (1 - p) u(c₂) , where for any x < 6,000, u(x) = 2x, and for x greater than or equal to 6,000, u(x) = 12,000 + x.

• A)Sally will be risk neutral if her income is less than $6,000 and risk averse if her income is more than $6,000.
• B)Sally will be risk averse if her income is less than $6,000 but risk loving if her income is more than $6,000.
• C)For bets that involve no chance of her wealth exceeding $6,000, Sally will take any bet that has a positive expected net payoff.
• D)Sally will never take a bet if there is a chance that it leaves her with wealth less than $12,000.
• E)None of the above.

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Definitions:

Transcription

The process by which the information in a strand of DNA is copied into a new molecule of messenger RNA (mRNA).

Ribosomal Subunit

Components of the ribosome that work together in protein synthesis, with the smaller subunit binding to mRNA and the larger subunit binding tRNAs and catalyzing peptide bond formation.

Initiator tRNA

The transfer RNA that starts the translation process in protein synthesis by binding to the start codon on the mRNA with its anticodon.

Peptide Bond

A bond between the amine group of one amino acid and the carboxyl group of another. Joins amino acids in proteins.