Sally Kink Is an Expected Utility Maximizer with Utility Function

question 23

Multiple Choice

Sally Kink is an expected utility maximizer with utility function pu(c₁) + (1 - p) u(c₂) , where for any x < 6,000, u(x) = 2x, and for x greater than or equal to 6,000, u(x) = 12,000 + x.

• A)Sally will be risk neutral if her income is less than $6,000 and risk averse if her income is more than $6,000.
• B)Sally will be risk averse if her income is less than $6,000 but risk loving if her income is more than $6,000.
• C)For bets that involve no chance of her wealth exceeding $6,000, Sally will take any bet that has a positive expected net payoff.
• D)Sally will never take a bet if there is a chance that it leaves her with wealth less than $12,000.
• E)None of the above.

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Definitions:

Sleep Apnoea

A sleep disorder characterized by pauses in breathing or periods of shallow breathing during sleep.

Somnambulism

A sleep disorder in which people walk or perform other activities while they are still asleep; commonly known as sleepwalking.

Insomnia

A sleep disorder characterized by difficulty falling asleep, staying asleep, or obtaining restorative sleep, leading to daytime impairment.

Pseudoinsomnia

A condition where individuals believe they have slept less than they actually have, often perceiving their sleep as insufficient or unrefreshing.