Figure 14-2. The figure shows a utility function for Mary Ann.
-Refer to Figure 14-2. From the appearance of the utility function, we know that
A)Mary Ann is risk averse.
B)Mary Ann gains less satisfaction when her wealth increases by X dollars than she loses in satisfaction when her wealth decreases by X dollars.
C)the property of diminishing marginal utility applies to Mary Ann.
D)All of the above are correct.

Question

Figure 14-2. The figure shows a utility function for Mary Ann. 
-Refer to Figure 14-2. From the appearance of the utility function, we know that
A)Mary Ann is risk averse. 
B)Mary Ann gains less satisfaction when her wealth increases by X dollars than she loses in satisfaction when her wealth decreases by X dollars. 
C)the property of diminishing marginal utility applies to Mary Ann. 
D)All of the above are correct.

Quizplus · Accepted Answer

The appearance of the utility function in Figure 14-2 suggests that Mary Ann is risk averse, as indicated by the diminishing marginal utility of wealth. This means that she gains less satisfaction as her wealth increases by X dollars than she loses in satisfaction if her wealth decreases by the same amount. This is due to the property of diminishing marginal utility, which implies that the satisfaction or utility derived from each additional unit of a good or service decreases as more units are consumed. Therefore, all of the above statements are correct.