If a person is risk averse,then as wealth increases,total utility of wealth
A)increases at an increasing rate.
B)increases at a decreasing rate.
C)decreases at an increasing rate.
D)decreases at a decreasing rate.

Question

Quizplus · Accepted Answer

If a person is risk averse, they value each additional unit of wealth less than the previous one. As wealth increases, the marginal utility of each additional unit of wealth decreases. Therefore, the total utility of wealth increases at a decreasing rate. This means that as the person gains more wealth, the satisfaction gained from each additional unit of wealth decreases.

If a Person Is Risk Averse,then as Wealth Increases,total Utility