sec 27.2 mc managing risk

1、Copyright Cengage Learning. Powered by Cognero. Page 11. Risk aversion helps to explain various things we observe in the economy, includinga. adherence to the old adage, “Don’t put all your eggs in one basket.”b. insura

2、nce.c. the risk-return trade-off.d. All of the above are correct.ANSWER: dDIFFICULTY: EasyREFERENCES: Managing RisKLEARNING OBJECTIVES:ECON.MANK.120 - Explain the implications of being risk averse.TOPICS: Financ

3、ial economics RiskKEYWORDS: BLOOM'S: ComprehensionCUSTOM ID: 001.27.2 - MC - MANK082. Risk aversion helps to explain various things we observe in the economy, includinga. adherence to the old adage, “Don’t put al

4、l your eggs in one basket.”b. insurance.c. the risk-return trade-off.d. All of the above are correct.ANSWER: dDIFFICULTY: EasyREFERENCES: Managing RisKLEARNING OBJECTIVES:ECON.MANK.120 - Explain the implications o

5、f being risk averse.TOPICS: Financial economics RiskKEYWORDS: BLOOM'S: ComprehensionCUSTOM ID: 002.27.2 - MC - MANK083. Economists have developed models of risk aversion using the concept ofa. utility and the

6、associated assumption of diminishing marginal utility.b. utility and the associated assumption of increasing marginal utility.c. income and the associated assumption of diminishing marginal wealth.d. income and the asso

7、ciated assumption of increasing marginal wealth.ANSWER: aDIFFICULTY: EasyREFERENCES: Managing RisKLEARNING OBJECTIVES:ECON.MANK.120 - Explain the implications of being risk averse.TOPICS: Financial economicsKEYW

8、ORDS: BLOOM'S: ComprehensionCUSTOM ID: 003.27.2 - MC - MANK08Copyright Cengage Learning. Powered by Cognero. Page 3Wealth Utility$50,000 700051,000 725052,000 749953,000 7746If Matt’s current wealth is $51,000, t

9、hena.his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Matt is risk averse.b.his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000.

10、 Matt is not risk averse.c.his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Matt is risk averse.d.his gain in utility from gaining $1,000 is less than his loss in utility from

11、 losing $1,000. Matt is not risk averse.ANSWER: cDIFFICULTY: ModerateREFERENCES: Managing RisKLEARNING OBJECTIVES:ECON.MANK.120 - Explain the implications of being risk averse.TOPICS: Consumer theory Utility an

12、alysisKEYWORDS: BLOOM'S: AnalysisCUSTOM ID: 007.27.2 - MC - MANK088. David’s Utility FunctionWealth Utility$60,000 500$61,000 505$62,000 509$63,000 512.5If David’s current wealth is $61,000, thena.his gain in uti

13、lity from gaining $1,000 is less than his loss in utility from losing $1,000. David is risk averse.b.his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. David is not risk averse

14、.c.his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. David is risk averse.d.his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000.

15、David is not risk averse.ANSWER: aDIFFICULTY: ModerateREFERENCES: Managing RisKLEARNING OBJECTIVES:ECON.MANK.120 - Explain the implications of being risk averse.TOPICS: Consumer theory Utility analysisKEYWORDS: