Figure 27-4

question 229

Multiple Choice

Figure 27-4. The figure shows a utility function for Alex.
-Refer to Figure 27-4. If most people's utility functions look like Alex's utility function, then it is easy to explain
Why

• A) people buy various types of insurance.
• B) we observe a trade-off between risk and return.
• C) most people prefer to hold diversified portfolios of assets to undiversified portfolios of assets.
• D) None of the above are correct.

---

Definitions:

Teacher

An individual who guides, instructs, or imparts knowledge and skills to others, especially in an educational context.

Learner

An individual who is acquiring knowledge, skills, or competencies through study, experience, or teaching.

Confederate

refers to an individual who is part of a larger group, often used in the context of the American Civil War or in psychological experiments to describe a person who is secretly working with the experimenter.

Philip Zimbardo

An American psychologist known for his research on social psychology, notably the Stanford prison experiment.