Figure 19-1.The figure shows a utility function.
-Refer to Figure 19-1.Suppose the person to whom this utility function applies begins with $600 in wealth.Starting from there,
A) she would be willing to accept a coin-flip bet that would result in her winning $200 if the result was "heads" or losing $200 if the result was "tails."
B) the pain of losing $200 of her wealth would equal the pleasure of adding $200 to her wealth.
C) the pain of losing $200 of her wealth would exceed the pleasure of adding $200 to her wealth.
D) the pleasure of adding $200 to her wealth would exceed the pain of losing $200 of her wealth.

Question

Figure 19-1.The figure shows a utility function. 
-Refer to Figure 19-1.Suppose the person to whom this utility function applies begins with $600 in wealth.Starting from there,
A) she would be willing to accept a coin-flip bet that would result in her winning $200 if the result was "heads" or losing $200 if the result was "tails." 
B) the pain of losing $200 of her wealth would equal the pleasure of adding $200 to her wealth. 
C) the pain of losing $200 of her wealth would exceed the pleasure of adding $200 to her wealth. 
D) the pleasure of adding $200 to her wealth would exceed the pain of losing $200 of her wealth.

Quizplus · Accepted Answer

The utility function likely exhibits diminishing marginal utility of wealth, meaning the loss of $200 would cause more pain than the pleasure gained from a $200 increase.

Figure 19-1.The Figure Shows a Utility Function