Suppose that an individual is risk-averse.If this individual's utility function is depicted in a graph, with income measured on the horizontal axis and "utils" on the vertical axis, the graph would be an upward-sloping:
A)straight line through the origin.
B)straight line with a positive vertical intercept.
C)curve with a steadily increasing slope (i.e., a curve that is convex from below).
D)curve with a steadily decreasing slope (i.e., a curve that is concave from below).

Question

Quizplus · Accepted Answer

A risk-averse individual's utility function would exhibit diminishing marginal utility of income, meaning that the slope of the curve would decrease as income increases. This corresponds to a curve with a steadily decreasing slope, or a curve that is concave from below.

Suppose That an Individual Is Risk-Averse