I thought the answer was A but it is wrong. I am super confused, thank you! The table shows the utility Tia receives at various income levels, but she does not know what her income will be nextyear. There is a 10% chance her income will be $20,000, a 30% chance her income will be $30,000, and a 60% chanceher income will be $40,000. We know that Tia is risk-averse because:Table: Utility and Income Levels for TamaraIncome LevelUtility Level (utils)$20,0002,50025,00026,51628,00029,00030,0003,0003,14431,00035,00040,0003,2703.3503,4203,4803,6803,880her expected income is less than what she may actually earn.she would prefer $40,000, but there is a risk she will make only $20,000.she experiences diminishing marginal utility of income.her expected income is more than what she may actually earn.

Risk aversion is an economic concept that depicts the behavior of individuals or firms who prefer to…

The table shows the utility Tia receives at various income levels, but she does not know what her income will be next year. There is a 10% chance her income will be $20,000, a 30% chance her income will be $30,000, and a 60% chance her income will be $40,000. We know that Tia is risk-averse because:

The table shows the utility Tia receives at various income levels, but she does not know what her income will be next year. There is a 10% chance her income will be $20,000, a 30% chance her income will be $30,000, and a 60% chance her income will be $40,000. We know that Tia is risk-averse because:

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

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