Figure 9-2. The figure shows a utility function for Mary Ann.

-Refer to Figure 9-2. From the appearance of the utility function, we know that
A) Mary Ann is risk averse.
B) Mary Ann gains less satisfaction when her wealth increases by X dollars than she loses in satisfaction when her wealth decreases by X dollars.
C) the property of diminishing marginal utility applies to Mary Ann.
D) All of the above are correct.

Question

Figure 9-2. The figure shows a utility function for Mary Ann.
 
-Refer to Figure 9-2. From the appearance of the utility function, we know that
A) Mary Ann is risk averse. 
B) Mary Ann gains less satisfaction when her wealth increases by X dollars than she loses in satisfaction when her wealth decreases by X dollars. 
C) the property of diminishing marginal utility applies to Mary Ann. 
D) All of the above are correct.

Quizplus · Accepted Answer

The appearance of the utility function in Figure 9-2 indicates that Mary Ann is risk averse, as she prefers a certain amount of wealth over a risky alternative with the same expected value. The curved shape of the function also indicates that the property of diminishing marginal utility applies to Mary Ann, meaning that as her wealth increases, the additional satisfaction she gains from an extra dollar of wealth decreases. This also implies that Mary Ann gains less satisfaction when her wealth increases by X dollars than she loses in satisfaction when her wealth decreases by X dollars. Therefore, all of the above statements are correct.