In constructing a utility curve,
A)a comparison is made of the different amounts of money at different times.
B)the certainty of a certain amount is compared with the willingness to gamble that amount on a larger amount.
C)one takes the risk out of gambling.
D)inflation plays a critical part in the evaluation.
E)None of the above

Question

Quizplus · Accepted Answer

Utility curve is a graphical representation of the individual's preferences for different combinations of goods and services. It is a comparison of the certainty of a certain amount with the willingness to gamble that amount on a larger amount, which is known as the gamble-for-gain or the risk preference question. The construction of a utility curve is based on the assumption that individuals face choices among uncertain outcomes and attempt to maximize their expected utility.

In Constructing a Utility Curve