SOLVED

11) For a risk-averse individual, as wealth increases, total utility ________ and marginal utility ________. A) increases; increases B) increases ; decreases C) decreases; increases D) decreases; decreases 12) For a risk-averse individual, as wealth increases, total utility A) increases at a decreasing rate. B) increases at a constant rate. C) increases at an increasing rate. D) is constant. 13) The slope of the utility of wealth curve of a risk-averse person A) increases as wealth increases. B) decreases as wealth increases. C) is constant. D) is negative. 14) A risk-averse person’s marginal utility of wealth A) increases as wealth increases. B) decreases as wealth increases. C) is constant. D) is negative. 15) Expected utility is a weighted average in which the weights are A) average incomes. B) marginal incomes. C) total incomes. D) probabilities. 16) Pedro’s utility of wealth is 6 units for $10,000 and 10 units for $20,000. A friend gave him a lottery ticket for his birthday. The ticket won, giving him either $10,000 with probability 0.5 or $20,000 with probability 0.5. Pedro’s expected utility from the lottery ticket is A) between 6 and 8 units. B) equal to 8 units. C) between 8 and 10 units. D) equal to 10 units. 17) You took a summer job as a salesperson in a shoe store with the knowledge that you will either make $2,000 or $3,500 with probabilities 0.4 and 0.6 respectively. What is your expected income for the summer job? A) $2,000 B) $3,000 C) $5,000 D) $2,900 18) If an individual has a 0.3 probability of receiving $10 and a 0.7 probability of receiving $20, the expected income is A) $20. B) $7. C) $14. D) $17. 19) Jason is a Web page designer. He estimates that this summer, he has a 0.6 probability of making $10,000 and a 0.4 probability of making only $2,000. What is Jason’s expected income this summer? A) $12,000 B) $6,800 C) $6,000 D) $10,000 20) Christy is a telemarketer. She estimates that this summer, she has a 0.2 probability of earning $10,000, a 0.5 probability of earning $5,000, and a 0.3 probability of earning only $1,000. What is Christy’s expected income? A) $7,256 B) $5,333 C) $4,800 D