Question 1
Refer to the data provided in Table 17.2 below to answer the following question(s). The table shows the relationship between income and utility for Sue.
Refer to Table 17.2. From the table, we can see that Sue is
◦ risk-averse.
◦ risk-loving.
◦ risk-neutral.
◦ We cannot determine Sue's attitude toward risk from the table.
Question 2
Refer to the data provided in Table 17.2 below to answer the following question(s). The table shows the relationship between income and utility for Sue.
Refer to Table 17.2. Sue earns $40,000 annually. She has the opportunity to bet her entire salary on the upcoming super bowl. If Sue takes the bet, she will pick the Patriots. She believes that the Patriots have a 50-50 chance of winning the game. If the Patriots win, Sue will double her money ($80,000) but if they lose she loses her entire salary ($0). This bet can be characterized as
◦ risk-neutral.
◦ an unfair bet.
◦ a fair bet.
◦ risk-loving.
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