If we assume that the decision maker is risk-averse, then we can conclude that the economic nature of risk is that its presence will have the following effect on the desirability of a given undertaking or investment project.
A) Increase the desirability of a given undertaking or investment project.
B) Has no effect on the desirability of a given undertaking or investment project.
C) Lessen the desirability of a given undertaking or investment project.
D) Its presence is not related to the desirability of a given undertaking or investment project.
E) Increase the market efficiency of a given undertaking or investment project.

Question

Quizplus · Accepted Answer

If the decision maker is risk-averse, it means that they would prefer a certain outcome over an uncertain one with the same expected value. This implies that the presence of risk will lessen the desirability of a given undertaking or investment project. Therefore, the correct choice is C.

If We Assume That the Decision Maker Is Risk-Averse, Then