Figure 14-4. The figure shows a utility function for Dexter.
-Refer to Figure 14-4. In what way(s) does the graph differ from the usual case?
A)The utility function shown here is upward-sloping, whereas in the usual case the utility function is downward-sloping.
B)The utility function shown here is bowed downward (convex), whereas in the usual case the utility function is bowed upward (concave).
C)On the graph shown here, wealth is measured along the horizontal axis, whereas in the usual case saving is measured along the horizontal axis.
D)On the graph shown here, utility is measured along the vertical axis, whereas in the usual case satisfaction is measured along the vertical axis.

Question

Figure 14-4. The figure shows a utility function for Dexter. 
-Refer to Figure 14-4. In what way(s) does the graph differ from the usual case?
A)The utility function shown here is upward-sloping, whereas in the usual case the utility function is downward-sloping. 
B)The utility function shown here is bowed downward (convex), whereas in the usual case the utility function is bowed upward (concave). 
C)On the graph shown here, wealth is measured along the horizontal axis, whereas in the usual case saving is measured along the horizontal axis. 
D)On the graph shown here, utility is measured along the vertical axis, whereas in the usual case satisfaction is measured along the vertical axis.

Quizplus · Accepted Answer

The utility function shown here is bowed downward (convex), whereas in the usual case the utility function is bowed upward (concave). This means that the marginal utility of wealth decreases at a decreasing rate as wealth increases, which implies risk aversion.