The last $2,000 of Samantha's wealth adds less to her utility than the previous $2,000.Based on this information,Samantha has
A)increasing marginal utility of wealth and is risk averse
B)increasing marginal utility of wealth and is not risk averse
C)decreasing marginal utility of wealth and is risk averse
D)decreasing marginal utility of wealth and is not risk averse

Question

Quizplus · Accepted Answer

The statement indicates that the marginal utility of wealth decreases as wealth increases. Therefore, Samantha has decreasing marginal utility of wealth. Additionally, the fact that the last $2,000 adds less to her utility than the previous $2,000 suggests risk aversion, as it implies that Samantha is willing to give up some wealth in order to avoid risk.

The Last $2,000 of Samantha's Wealth Adds Less to Her