A Risk-Averse Consumer May Decline a Risky Prospect Even If

question 83

True/False

A risk-averse consumer may decline a risky prospect even if it offers a positive expected value.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the manufacturing process of a product and are a significant component of its production cost.

Unfavorable

A term often used in budgeting and financial analysis to describe results that are worse than expected or budgeted figures.

Cost Variance

The difference between actual cost and the flexible budget at actual volumes.

Actual Cost

The incurred expenditure on materials, labor, and overhead necessary to produce a product or perform a service, reflecting the genuine expense.