Risk aversion refers to the tendency of individuals to prefer a certain outcome over taking a gamble on an uncertain outcome, even if the gamble could potentially result in a higher payoff on average. This aversion to risk is a key concept in finance and economics, as it affects investment decisions, insurance choices, and other financial behaviors.

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Risk Aversion Is

Question 19

Multiple Choice

Risk aversion is

A) the general human tendency to stay away from activities that are dangerous, even if they may be fun.
B) the reluctance to choose an uncertain option that, on average, pays better than the certain payoff of a second option.
C) the reluctance to enter into any transaction in which the outcome is not known with certainty.
D) the tendency to seek out activities that are mildly dangerous but thrilling.

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