David's Utility Function If David's Current Wealth Is $61,000

question 362

Multiple Choice

David's Utility Function If David's current wealth is $61,000, then

• A) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. David is risk averse.
• B) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. David is not risk averse.
• C) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. David is risk averse.
• D) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. David is not risk averse.

---

Definitions:

Coase Theorem

A principle asserting that if property rights exist, and are transferable, externalities can be fully corrected through bargaining without government intervention.

Pollution Damage

The detrimental effects on the environment, human health, or property caused by pollutants and waste emissions from industrial, agricultural, or residential sources.

Bargaining

The process of negotiating the terms of a deal or agreement between parties with the aim of reaching a mutually acceptable outcome.

Marginal Social Cost

The additional cost society bears for the production of one more unit of a good or service.