Asked by Ayeshah Jones on May 21, 2024
Verified
A person with a diminishing marginal utility of income:
A) will be risk averse.
B) will be risk neutral.
C) will be risk loving.
D) cannot decide without more information
Diminishing Marginal Utility
Principle that as more of a good is consumed, the consumption of additional amounts will yield smaller additions to utility.
- Discern the influence of being averse to risk on the strategy adopted for making investment decisions.
Verified Answer
TM
Thulasi MahendrarajahMay 22, 2024
Final Answer :
A
Explanation :
A person with a diminishing marginal utility of income will value each additional dollar less than the previous one. As a result, they will be risk-averse and prefer a certain outcome with a known amount of income instead of taking a gamble with the potential for higher income but also the potential for lower income.
Learning Objectives
- Discern the influence of being averse to risk on the strategy adopted for making investment decisions.
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