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

-Refer to Figure 9-2. Suppose Mary Ann begins with $1,050 in wealth. Starting from there,
A) she would be willing to accept a coin-flip bet that would result in her winning $300 if the result was "heads" or losing $300 if the result was "tails."
B) the pain of losing $300 of her wealth would equal the pleasure of adding $300 to her wealth.
C) the pain of losing $300 of her wealth would exceed the pleasure of adding $300 to her wealth.
D) the pleasure of adding $300 to her wealth would exceed the pain of losing $300 of her wealth.

Question

Figure 9-2. The figure shows a utility function for Mary Ann.
 
-Refer to Figure 9-2. Suppose Mary Ann begins with $1,050 in wealth. Starting from there,
A) she would be willing to accept a coin-flip bet that would result in her winning $300 if the result was "heads" or losing $300 if the result was "tails." 
B) the pain of losing $300 of her wealth would equal the pleasure of adding $300 to her wealth. 
C) the pain of losing $300 of her wealth would exceed the pleasure of adding $300 to her wealth. 
D) the pleasure of adding $300 to her wealth would exceed the pain of losing $300 of her wealth.

Quizplus · Accepted Answer

Mary Ann's utility function likely exhibits diminishing marginal utility of wealth, meaning the loss of $300 would have a greater negative impact on her utility than the positive impact of gaining $300.