Figure 14-2. The figure shows a utility function for Mary Ann.
-Refer to Figure 14-2. Suppose Mary Ann begins with $1,050 in wealth. Which of the following coin-flip bets would she definitely not be willing to accept?
A)If it is "heads," she wins $100; if it is tails, she loses $95.
B)If it is "heads," she wins $150; if it is tails, she loses $150.
C)If it is "heads," she wins $150; if it is tails, she loses $140.
D)She definitely would not accept any of these bets.

Question

Figure 14-2. The figure shows a utility function for Mary Ann. 
-Refer to Figure 14-2. Suppose Mary Ann begins with $1,050 in wealth. Which of the following coin-flip bets would she definitely not be willing to accept?
A)If it is "heads," she wins $100; if it is tails, she loses $95. 
B)If it is "heads," she wins $150; if it is tails, she loses $150. 
C)If it is "heads," she wins $150; if it is tails, she loses $140. 
D)She definitely would not accept any of these bets.

Quizplus · Accepted Answer

Mary Ann would not accept a bet where the potential loss is equal to the potential gain, as it does not provide a positive expected value or utility.