A.1 If an individual is risk averse, then:i. He prefers any lottery to amounts of money that are certain.ii. The certainty equivalent of a lottery is higher than its expected value.X. The utility function is concave.iv. The utility function is decreasing.

In the class lecture notes, we motivated how “risk aversion” (the dislike of risk) is the same as diminishing marginal utility of wealth.  The basic idea is thatSelected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aFrom a utility standpoint, the pain of losing $100 is greater than the happiness of winning $100.bThe greater a person’s wealth, the more the person dislikes taking a gamble.cAn insurance company typically charges a higher premium to wealthier customers.dWealthier people are in a better position to take gambles because they will still have money left over.

Which of the following statements about risk aversion is TRUE?a.Risk aversion will always lead to a negative outcome.b.Ambitious people with power that can be taken away are more susceptible to risk aversion.c.Preferring a 50/50 chance of winning $200 to a guaranteed win of $50 is an example of risk aversion.d.Both (b) and (c).

A risk averse person has:a.a variable marginal utility of income.b.a constant marginal utility of income.c.a decreasing marginal utility of income.d.an increasing marginal utility of income

1. Which of the following statements regarding risk-averse investors is true?a.They accept investments that are fair games.b.They only care about the rate of return.c.They are willing to accept lower returns and high risk.d.They only accept risky investments that offer risk premiums over the risk-free rate.

Risk utility rises at a decreasing rate for a _____ person.Group of answer choicesrisk-neutralrisk-averserisk-seekingrisk-indifferent