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Consider the utility function over money (x): u = x. Which of the following statements are true about this consumer's preferences? They are risk averse They are risk neutral They are risk loving They will always fully insure They will potentially offer insurance to a risk averse person.

Consider the utility function over money (x): u = x. Which of the following statements are true about this consumer's preferences? They are risk averse They are risk neutral They are risk loving They will always fully insure They will potentially offer insurance to a risk averse person.

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.4P
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Tea drinkers are particular about how much sugar should be in a cup of tea. A and B must have one unit of sugar for every 12 units of tea. Somehow A and B's host put all the tea in one room and all the sugar in the other, so A has 10 units of sugar and B has 120 units of tea. Looking at their consumption in an Edgeworth box, with tea on the horizontal axiz, the contract curve is A non-linear curve that is convex to A's x-axis connecting their origins. A non-linear curve that is convex to B's x-axis connecting their origins. A straight line connecting their origins. A right angle that runs directly along A's x-axis and B's y-axis connecting their origins. O A right angle that runs directly along B's x-axis and A's y-axis connecting their origins.
Transcribed Image Text:Tea drinkers are particular about how much sugar should be in a cup of tea. A and B must have one unit of sugar for every 12 units of tea. Somehow A and B's host put all the tea in one room and all the sugar in the other, so A has 10 units of sugar and B has 120 units of tea. Looking at their consumption in an Edgeworth box, with tea on the horizontal axiz, the contract curve is A non-linear curve that is convex to A's x-axis connecting their origins. A non-linear curve that is convex to B's x-axis connecting their origins. A straight line connecting their origins. A right angle that runs directly along A's x-axis and B's y-axis connecting their origins. O A right angle that runs directly along B's x-axis and A's y-axis connecting their origins.
Consider an economy where all consumer preferences exhibit diminishing marginal utility over all goods. Also assume that all firms have diminishing marginal products from their inputs. This economy is productively efficient when (select all that apply) | All goods that are produced are consumed. | Consumers' marginal rates of substitution are equal. All firms equal marginal rates of transformation. | Firms' marginal rates of transformation equal consumers' marginal rates of substitution. 4. Consider the utility function over money (x): u = x. Which of the following statements are true about this consumer's preferences? | They are risk averse | They are risk neutral | They are risk loving | They will always fully insure | They will potentially offer insurance to a risk averse person.
Transcribed Image Text:Consider an economy where all consumer preferences exhibit diminishing marginal utility over all goods. Also assume that all firms have diminishing marginal products from their inputs. This economy is productively efficient when (select all that apply) | All goods that are produced are consumed. | Consumers' marginal rates of substitution are equal. All firms equal marginal rates of transformation. | Firms' marginal rates of transformation equal consumers' marginal rates of substitution. 4. Consider the utility function over money (x): u = x. Which of the following statements are true about this consumer's preferences? | They are risk averse | They are risk neutral | They are risk loving | They will always fully insure | They will potentially offer insurance to a risk averse person.
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