Figure 14-4. The figure shows a utility function for Dexter.
-Refer to Figure 14-4. Suppose Dexter begins with $1,300 in wealth. Starting from there,
A)the pain of losing $500 of his wealth would equal the pleasure of adding $500 to his wealth.
B)the pain of losing $500 of his wealth would exceed the pleasure of adding $500 to his wealth.
C)the pleasure of adding $500 to his wealth would exceed the pain of losing $500 of his wealth.
D)This cannot be determined from the graph.

Question

Figure 14-4. The figure shows a utility function for Dexter. 
-Refer to Figure 14-4. Suppose Dexter begins with $1,300 in wealth. Starting from there,
A)the pain of losing $500 of his wealth would equal the pleasure of adding $500 to his wealth. 
B)the pain of losing $500 of his wealth would exceed the pleasure of adding $500 to his wealth. 
C)the pleasure of adding $500 to his wealth would exceed the pain of losing $500 of his wealth. 
D)This cannot be determined from the graph.

Quizplus · Accepted Answer

According to the graph, Dexter's utility increases as his wealth increases. Therefore, adding $500 to his wealth would result in a greater level of satisfaction than losing $500 of his wealth would result in dissatisfaction. Thus, the pleasure of adding $500 to his wealth would exceed the pain of losing $500 of his wealth.