A manager who sets U($20,0000)= 20,U($40,000)= 40,U($60,000)= 70 (where "U( )" stands for the utility at the particular outcome)has a utility function that:
A)exhibits increasing marginal utility
B)is convex.
C)is linear.
D)exhibits decreasing marginal utility.
E)is concave.

Question

Quizplus · Accepted Answer

The utility function is convex because the second derivative is positive, indicating that the marginal utility is increasing.

A Manager Who Sets U($20,0000)= 20,U($40,000)= 40,U($60,000)= 70 (Where "U