Diminishing marginal utility of wealth implies that the utility function
A)has increasing slope and a person is risk averse.
B)has increasing slope and a person is not risk averse.
C)has decreasing slope and a person is risk averse
D)has decreasing slope and a person is not risk averse.

Question

Quizplus · Accepted Answer

Diminishing marginal utility of wealth means that the more wealth a person has, the less utility (or satisfaction) they receive from an additional unit of wealth. This implies that the utility function has a decreasing slope. Additionally, a person who experiences diminishing marginal utility of wealth is likely to be risk averse, as they would be willing to give up some potential gain in exchange for reducing the risk of loss. Therefore, the correct answer is C - decreasing slope and a person is risk averse.

Diminishing Marginal Utility of Wealth Implies That the Utility Function