"> (Answered) Consider a consumer whose utility function for income is given by square root of x . This consumer is offered a choice between: - Tutorials Prime

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(Answered) Consider a consumer whose utility function for income is given by square root of x . This consumer is offered a choice between:


Consider a consumer whose utility function for income is given by square root of x . This consumer is offered a choice between:


Consider a consumer whose utility function for income is given by square root of x.​This consumer is offered a choice between: (1) a certain outcome of obtaining $225 and (2) a risky gamble which generates either an outcome of x1=$100 with probability Pr(x1)=0.5, or an outcome of x2=$400 with probability Pr(x2)=0.5​​. Which of the following statements is true? A. Such a person prefers option (1) and she is risk averse B. She is risk averse but she still prefers option (2) since the expected value is higher C. Such a person is indifferent between both options so that makes her risk neutral. D. Such a person is indifferent between the two choices and is risk averse. E. She prefers option (2) so that makes her risk loving.

 


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Jan 02, 2020

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