Multiple Choice
Which of the following statements is correct for a decision maker facing a choice between a sure thing and a lottery when the sure thing had the expected payoff of the lottery are equal?
A) Risk-loving decision makers will require a positive risk premium to bear risk.
B) Risk-neutral decision makers will require a positive risk premium to bear risk.
C) Risk-averse decision makers will require a positive risk premium to bear risk.
D) The risk premium depends on the characteristics of the lottery, not on the characteristics of the utility function of the decision maker.
Correct Answer:
Verified
Correct Answer:
Verified
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