When will an individual's indifference curves be identical with the iso-expected value lines?
A) Never.
B) When the individual is risk averse.
C) When the individual is risk neutral.
D) When the individual is risk preferring.

Question

Quizplus · Accepted Answer

Iso-expected value lines represent a combination of risky options with the same expected value, while indifference curves represent the individual's preference for risk and return. If an individual is risk neutral, they are indifferent between risky options that have the same expected value, so their indifference curves will coincide with the iso-expected value lines. However, if an individual is risk averse or risk preferring, their indifference curves will be above or below the iso-expected value lines, respectively. Therefore, only when an individual is risk neutral will their indifference curves be identical with the iso-expected value lines.

When Will an Individual's Indifference Curves Be Identical with the Iso-Expected