A consumer who is risk averse is best characterized as ________.
A) a consumer who may accept a risky prospect even if the expected gain is negative
B) a consumer who demands a positive expected gain as compensation for taking risk
C) a consumer who completely ignores risk and makes his or her decisions based solely on expected values
D) None of the above

Question

Quizplus · Accepted Answer

A risk-averse consumer is someone who prefers less risk and demands a positive expected gain as compensation for taking a risk. They would not accept a risky prospect if the expected gain is negative. They also do not completely ignore risk as it plays a significant role in their decision-making process.

A Consumer Who Is Risk Averse Is Best Characterized as ________