A risk-averse person's expected utility function is
A) decreasing.
B) convex.
C) concave.
D) a straight line.

Question

Quizplus · Accepted Answer

A risk-averse person has a concave expected utility function. This is because they value gains and losses differently, with losses having a greater impact on their overall utility. As a result, the marginal utility of wealth decreases as wealth increases, leading to a concave shape of the function.

A Risk-Averse Person's Expected Utility Function Is