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:

Grief

An intense emotional suffering caused by loss, especially of a loved one, characterized by feelings of sadness, longing, and despair.

Divorce Rate

A statistical measure representing the number of divorces occurring among a population within a given time period.

Western Countries

Refers to nations primarily located in the Western hemisphere, often associated with advanced economies, democratic governance, and a cultural heritage rooted in European traditions.

Social Clock

The social clock refers to the cultural timeline on which individuals are expected to achieve certain life milestones.