Figure 27-4

question 1

Multiple Choice

Figure 27-4.The figure shows a utility function for Alex.
-Refer to Figure 27-4.From the appearance of Alex's utility function,we know that

• A)if Alex owns a house,then he definitely would buy fire insurance provided the cost of the insurance was reasonable.
• B)Alex would voluntarily exchange a portfolio of stocks with a high average return and a high level of risk for a portfolio with a low average return and a low level of risk.
• C)Alex is risk averse.
• D)Alex is not risk averse.

---

Definitions:

Marginal Utility

The increased enjoyment or advantage derived by a consumer from the consumption of an extra unit of a good or service.

Lemonade

A beverage typically made from lemon juice, water, and sugar.

Marginal Utility

The additional satisfaction gained from consuming one more unit of a good or service.

Market Basket

A set of goods and services used to represent what is consumed by a typical consumer for the purpose of measuring inflation or cost of living.