Catherine is risk averse.When faced with a choice between a gamble and a certain level of wealth she will
A) always prefer the gamble.
B) always prefer the certain level of wealth.
C) prefer the gamble if the expected utility from it is higher than the utility from the certain level of wealth.
D) prefer the certain level of wealth if the expected utility from the gamble is higher than the utility of the certain level of wealth.

Question

Quizplus · Accepted Answer

A risk-averse individual prefers the option with the higher expected utility. If the expected utility of the gamble exceeds that of the certain wealth, she will choose the gamble.

Catherine Is Risk Averse