Asked by Kenneth Ajuobi on Sep 24, 2024
Verified
A risk averse individual
A) values a lottery at more than its expected value
B) values a lottery at exactly its expected value
C) values a lottery at less than its expected value
D) tends to play lots of lotteries
Expected Value
The calculated average of all possible values for a random variable, weighted by their probabilities of occurrence.
Lottery
A form of gambling involving the drawing of numbers at random for a prize, often run by state or federal governments.
- Differentiate between risk averse, risk neutral, and risk loving individuals.
Verified Answer
BB
BISWAJYOTI BARAT1 day ago
Final Answer :
C
Explanation :
A risk averse individual will value a lottery at less than its expected value because they are willing to give up some potential gains to avoid potential losses. They prefer a certain outcome rather than taking a risk.
Learning Objectives
- Differentiate between risk averse, risk neutral, and risk loving individuals.