Persons whose utility functions are concave with respect to wealth are said to be
A)risk-seekers.
B)risk-neutral.
C)risk-averse.
D)fair gamblers.

Question

Quizplus · Accepted Answer

Risk aversion means that people prefer certainty to uncertainty. A concave utility function means that as one's wealth increases, the additional utility gained from an additional unit of wealth decreases. Therefore, people who have concave utility functions are less willing to take risks because the potential losses from a risky decision outweigh the potential gains.

Persons Whose Utility Functions Are Concave with Respect to Wealth