Economists Have Developed Models of Risk Aversion Using the Concept

question 24

Multiple Choice

Economists have developed models of risk aversion using the concept of

• A)utility and the associated assumption of diminishing marginal utility.
• B)utility and the associated assumption of increasing marginal utility.
• C)income and the associated assumption of diminishing marginal wealth.
• D)income and the associated assumption of increasing marginal wealth.

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Definitions:

Bargained-For Exchange

An exchange of promises or performance by parties to a contract that provides the consideration necessary to make the contract legally enforceable.

Breach of Contract

The violation of any term or condition of a binding legal agreement, which may result in legal action for remedy.

Illusory Promise

A statement that appears to commit to an action but does not actually bind the party to any obligation.

Promissory Estoppel

A legal principle that prohibits a party from going back on a promise made to another party, if the latter has reasonably relied on that promise to their detriment.