If a risk-averse agent is faced with two gambles, both of which have the same expected monetary return but different variances, the agent will always choose the gamble whose variance is
A) greater
B) smaller
C) equivalent

Question

Quizplus · Accepted Answer

Since the agent is risk-averse, they prefer less variability in outcomes. Hence, the agent would choose the gamble with the smaller variance.

If a Risk-Averse Agent Is Faced with Two Gambles, Both