Sally Kink Is an Expected Utility Maximizer with Utility Function

question 7

Multiple Choice

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

• A)For bets that involve no chance of her wealth exceeding $2,000, Sally will take any bet that has a positive expected net payoff.
• B)Sally will be risk averse if her income is less than $2,000 but risk loving if her income is more than $2,000.
• C)Sally will be risk neutral if her income is less than $2,000 and risk averse if her income is more than $2,000.
• D)Sally will never take a bet if there is a chance that it leaves her with wealth less than $4,000.
• E)None of the above are true.

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Definitions:

Accessor Methods

Methods in object-oriented programming used to get the values of private fields of a class.

Instance Variable

An instance variable is a variable declared in a class for which each object of the class has its own value.

Abstraction

The concept of hiding complex implementation details and showing only the essentials, making it easier to handle complex systems.

Class Definition

The code structure in object-oriented programming that specifies the attributes and methods of a class.