David's Utility Function If David's current wealth is $61,000,then
A) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000.David is risk averse.
B) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000.David is not risk averse.
C) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000.David is risk averse.
D) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000.David is not risk averse.

Question

David's Utility Function  If David's current wealth is $61,000,then
A) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000.David is risk averse. 
B) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000.David is not risk averse. 
C) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000.David is risk averse. 
D) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000.David is not risk averse.

Quizplus · Accepted Answer

David's utility function exhibits diminishing marginal utility of wealth, meaning that his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. This implies that he is risk averse.

David's Utility Function If David's Current Wealth Is $61,000,then