Sally Kink Is an Expected Utility Maximizer with Utility Function

question 8

Multiple Choice

Sally Kink is an expected utility maximizer with utility function pu(c₁) + (1 - p) u(c₂) , where for any x < 8,000, u(x) = 2x, and for x greater than or equal to 8,000, u(x) = 16,000 + x.

• A)Sally will never take a bet if there is a chance that it leaves her with wealth less than $16,000.
• B)Sally will be risk neutral if her income is less than $8,000 and risk averse if her income is more than $8,000.
• C)Sally will be risk averse if her income is less than $8,000 but risk loving if her income is more than $8,000.
• D)For bets that involve no chance of her wealth exceeding $8,000, Sally will take any bet that has a positive expected net payoff.
• E)None of the above.

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Definitions:

Blood Glucose Levels

Blood glucose levels refer to the concentration of sugar in the blood, vital for energy production in the body and regulated by hormonal control mechanisms.

Gastrointestinal Hormones

Hormones released by the cells in the gastrointestinal tract that control various aspects of digestive functions.

Fat Content

The proportion of fat in a food or material.

Blood Glucose Levels

The concentration of glucose present in the blood, an important indicator of metabolic health and essential for diagnosing and managing diabetes.