Janet prefers to implement a public policy that can save 100 people out of 1,000 people than a policy that has a 10% chance of saving 1,0000 people.Once can say that Janet's preferences
A) do not support the expected utility theory.
B) are not rational.
C) are not complete.
D) are not risk neutral.

Question

Quizplus · Accepted Answer

Janet's preference indicates that she is risk averse and prefers a certain outcome (saving 100 people) over a risky outcome (10% chance of saving 1,000 people). This means that Janet is not risk neutral, and her preference contradicts the expected utility theory, which assumes that individuals make choices based solely on maximizing expected utility. It is not fair to say that Janet's preferences are irrational or incomplete, as people have different preferences and values.

Janet Prefers to Implement a Public Policy That Can Save