John Brown's utility of income function is U = log(I+1), where I represents income. From this information you can say that:
A) John Brown is risk neutral.
B) John Brown is risk loving.
C) John Brown is risk averse.
D) We need more information before we can determine John Brown's preference for risk.

Question

Quizplus · Accepted Answer

John Brown's utility function is increasing but at a decreasing rate. This implies that he is risk averse. As his income increases, the marginal utility of an additional dollar of income decreases.

John Brown's Utility of Income Function Is U = Log(I+1)