The Continuity Assumption States That

Multiple Choice

The continuity assumption states that:

A) given any prospect, there is a riskless outcome that can be replaced by another without changing the expected utility from the prospect.
B) if two prospects involve the same outcomes, a probability, e^*, exists that makes an individual indifferent between the prospects.
C) there is a probability that allows a risky prospect to be substituted for a riskless prospect in an individual's preference ordering.
D) given any prospect, an equivalent prospect can be created by substituting a prospect that is equivalent to a particular outcome.