When the utility function for a risk-neutral decision maker is graphed (with monetary value on the horizontal axis and utility on the vertical axis), the function appears as
A) a convex curve.
B) a concave curve.
C) an 'S' curve.
D) a straight line.

Question

​When the utility function for a risk-neutral decision maker is graphed (with monetary value on the horizontal axis and utility on the vertical axis), the function appears as
A) ​a convex curve.
B) ​a concave curve.
C) ​an 'S' curve.
D) ​a straight line.

Quizplus · Accepted Answer

A risk-neutral decision maker has a linear utility function, meaning that they value each additional unit of monetary value equally, resulting in a straight line when graphed.

​When the Utility Function for a Risk-Neutral Decision Maker Is

When the Utility Function for a Risk-Neutral Decision Maker Is