If a Person Is Risk Averse,then She Has

question 82

Multiple Choice

If a person is risk averse,then she has

• A)diminishing marginal utility of wealth,implying that her utility function gets flatter as wealth increases.
• B)diminishing marginal utility of wealth,implying that her utility function gets steeper as wealth increases.
• C)increasing marginal utility of wealth,implying that her utility function gets flatter as wealth increases.
• D)increasing marginal utility of wealth,implying that her utility function gets steeper as wealth increases.

Calculating expected values and expected utility for uncertain income scenarios.

Recognizing the characteristics of risk-averse individuals and their utility functions.

Identifying the factors that influence an individual's willingness to pay insurance premiums.

Comprehending the impact of differences in income or wealth on risk aversion.

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Definitions:

Collection Time

The average period it takes for a business to receive payments owed by its customers for goods or services sold on credit.

Money Market Securities

Short-term financial instruments that are typically liquid and considered safe, such as Treasury bills and certificates of deposit.

Average Daily Float

The average amount of un-cleared or in-process checks and electronic payments that are recorded in a company’s accounting system at any given time.

Collection Delay

The time it takes for a business to receive payment after issuing an invoice or credit sale, impacting cash flow.