If people are risk averse, then ?
Correct answer: B. All of these answers are true
- A. None of these answers are true
- B. All of these answers are true
- C. They dislike bad things more than the like comparable good things
- D. The utility they would lose from losing a Rs50 bet would exceed the utility they would gain from winning a Rs 50 bet
- E. Their utility function exhibit the property of diminishing marginal utility of wealth
Explanation
Risk aversion is represented by a concave utility function, meaning diminishing marginal utility of wealth and a greater utility loss from a given loss than the utility gain from an equal gain. Thus the listed descriptions are treated as true, making all of them the intended answer.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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