Ivett and Brenda are considering playing a game called Matching Fifties. In this game, Ivett and Brenda will each place a $50 bill on the table. Both players will then toss a fair coin. If both Ivett and Brenda toss heads or if they both toss tails, Ivett wins the $100 on the table. If one woman tosses heads and the other tosses tails, Brenda wins the $100 on the table.
-Ivett decides that she is not willing to play this game because a loss of $50 to Brenda will cause her to lose more utility than she should gain if she won $50 from Brenda. Ivett would be considered __________, but if she was __________, she would be willing to play the game.

Question

Quizplus · Accepted Answer

Ivett is risk averse because she is not willing to take the risk of losing $50. If she was risk neutral, she would be willing to play the game regardless of the outcome, but if she was risk loving, she would actually enjoy the thrill of taking risks and would be willing to play even if it meant losing money. Therefore, the best choice is C.

Ivett and Brenda Are Considering Playing a Game Called Matching