A utility function for risk averse individuals is ____ and/or ____.
A) decreasing, linear
B) decreasing, convex
C) increasing, linear
D) increasing, concave

Question

A utility function for risk averse individuals is ____ and/or ____.
A) decreasing, linear 
B) decreasing, convex 
C) increasing, linear 
D) increasing, concave

Quizplus · Accepted Answer

A risk averse individual prefers less risk and is willing to pay for it. Therefore, their utility function is increasing (more money provides more happiness) and concave (as they gain more money, each additional dollar is worth less to them).

A Utility Function for Risk Averse Individuals Is ____ And/or