A risk-averse individual is offered a gamble that promises a gain of $1000 with probability 0.25 and a loss of $300 with probability 0.75.Given this situation,he or she will:
A)definitely take the gamble.
B)definitely not take the gamble.
C)definitely take the gamble if his or her income is high enough.
D)take an action that cannot be determined given the information available.

Question

Quizplus · Accepted Answer

The decision to take the gamble depends on the individual's utility function, which reflects their attitude towards risk, and is not solely determined by the probabilities and outcomes provided.

A Risk-Averse Individual Is Offered a Gamble That Promises a Gain