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Author Question: What is the difference between the utility function of a risk averse person and a risk neutral ... (Read 220 times)

tsand2

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on: Jun 30, 2018
What is the difference between the utility function of a risk averse person and a risk neutral person.

Question 2

Assume that deciding to do internally something that was once purchased from a company upstream offers a 10 percent return. What is the cost of this decision?
 A) 10 percent.
  B) less than 10 percent.
  C) What was given up to do it internally.
  D) Not enough information is provided.


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alvinum

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Reply #1 on: Jun 30, 2018
Answer to Question 1

The utility function of a risk averse person is an upward rising curve concave to the wealth axis. The utility function of a risk neutral person is an upward sloping straight line.

Answer to Question 2

C


tsand2

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Reply 2 on: Jun 30, 2018
Great answer, keep it coming :)

apple

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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