A risk-loving person has a utility function that,with income on the horizontal axis and utility on the vertical axis,as income increases:
A) is horizontal.
B) is vertical.
C) has constant, positive slope.
D) is curved down.
E) is curved up.

Question

Quizplus · Accepted Answer

A risk-loving person has a tendency to prefer riskier options with higher potential payouts. This means that as their income increases, their marginal utility (the additional satisfaction gained from each additional unit of income) decreases at a slower rate than a risk-averse person. This leads to a curved-up utility function.

A Risk-Loving Person Has a Utility Function That,with Income on the Horizontal