Consider the following scenario when answering the following questions:
Ivett and Desiree are considering playing a game called Matching Fifties.In this game,Ivett and Desiree will each place a $50 bill on the table.Both players will then toss a fair coin.If both Ivett and Desiree toss heads or if they both toss tails,Ivett wins the $100 on the table.If one woman tosses heads and the other tosses tails,Desiree wins the $100 on the table.
-Ivett decides that she is not willing to play this game because a loss of $50 to Desiree will cause her to lose more utility than she should gain if she won $50 from Desiree.Ivett would be considered ________,but if she was ________,she would be willing to play the game.
A) risk loving; risk averse
B) risk neutral; risk averse
C) risk averse; risk neutral
D) risk loving; risk neutral
E) risk neutral; risk loving

Question

Quizplus · Accepted Answer

Ivett is risk averse, meaning she is averse to taking risks and dislikes losses more than she likes gains. If she was risk neutral, she would be indifferent to the outcome and if she was risk loving, she would enjoy taking risks and accept the possibility of loss. Therefore, Ivett would only be willing to play the game if she was risk neutral or risk-loving.

Consider the Following Scenario When Answering the Following Questions