-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.Bob is risk averse because
A) his utility function is concave.
B) he has diminishing marginal utility of wealth.
C) he is willing to pay a premium to avoid a risky situation.
D) All of the above.

Question

-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.Bob is risk averse because
A) his utility function is concave. 
B) he has diminishing marginal utility of wealth. 
C) he is willing to pay a premium to avoid a risky situation. 
D) All of the above.

Quizplus · Accepted Answer

All the options describe characteristics of a risk-averse individual. A concave utility function, diminishing marginal utility of wealth, and willingness to pay a premium to avoid risk are all indicative of risk aversion.

-The Above Figure Shows Bob's Utility Function