An individual whose attitude toward risk is illustrated in Figure 5.1 is
A) risk averse.
B) risk loving.
C) risk neutral.
D) None of the above is necessarily correct.

Question

Quizplus · Accepted Answer

The individual's level of risk aversion is determined by their level of wealth where W0 is the initial wealth level and ΔW is the potential change in wealth. The individual's attitude toward risk can be determined by the slope of the tangent line at their initial wealth level, which is negative for risk-averse individuals, positive for risk-loving individuals, and zero for risk-neutral individuals. In Figure 5.1, the slope of the tangent line at the initial wealth level is positive, indicating that the individual is risk-loving.

An Individual Whose Attitude Toward Risk Is Illustrated in Figure