Blanca would prefer a certain income of $20,000 to a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. Based on this information:
A) we can infer that Blanca neutral.
B) we can infer that Blanca is risk averse.
C) we can infer that Blanca is risk loving.
D) we cannot infer Blanca's risk preferences.

Question

Quizplus · Accepted Answer

Blanca's preference for a certain income over a gamble with equal chances of a higher or lower payoff indicates risk aversion.

Blanca Would Prefer a Certain Income of $20,000 to a Gamble