Which of the following is correct concerning a risk-averse person?
A)She would not play games where the probability of winning and losing a dollar are the same.
B)She might not buy health insurance if she thinks her risks are low.
C)Her marginal utility of wealth decreases as her income increases.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A risk-averse person is someone who prefers a certain outcome to an uncertain outcome with the same expected value. This means that they would not play games where the probability of winning and losing a dollar are the same, because they would rather have a sure thing than a gamble. They might also not buy health insurance if they think their risks are low, because they would rather save the money than pay for something they may not need. Finally, their marginal utility of wealth decreases as their income increases, because they get less satisfaction from each additional dollar they earn.

Which of the Following Is Correct Concerning a Risk-Averse Person