A risk-neutral consumer
A) will always refuse a fair gamble.
B) will always accept a fair gamble.
C) avoids all risk.
D) is indifferent between acceptance and refusal of a fair gamble.
E) ensures that any higher risk is offset by lower risk.

Question

Quizplus · Accepted Answer

A risk-neutral consumer is indifferent between acceptance and refusal of a fair gamble. This means that they do not consider the risk when making decisions and only look at the expected value. Therefore, they will always accept a fair gamble since the expected value is positive, but they would also be willing to refuse it if the expected value were negative.

A Risk-Neutral Consumer