-The above figure shows the utility of wealth curve for a homeowner whose only possession is a $50,000 house. Which of the following statements is TRUE?
A) This person has diminishing marginal utility of wealth.
B) This person is not risk averse.
C) Risky situations cause this person no loss of utility.
D) None of the above are correct.

Question

-The above figure shows the utility of wealth curve for a homeowner whose only possession is a $50,000 house. Which of the following statements is TRUE?
A) This person has diminishing marginal utility of wealth. 
B) This person is not risk averse. 
C) Risky situations cause this person no loss of utility. 
D) None of the above are correct.

Quizplus · Accepted Answer

The utility of wealth curve typically shows diminishing marginal utility, meaning each additional dollar of wealth provides less additional utility, which is characteristic of risk-averse individuals.

-The Above Figure Shows the Utility of Wealth Curve for a Homeowner