Sally Kink Is an Expected Utility Maximizer with Utility Function

Multiple Choice

Sally Kink is an expected utility maximizer with utility function pu(c₁) + (1 - p) u(c₂) , where for any x < 8,000, u(x) = 2x, and for x greater than or equal to 8,000, u(x) = 16,000 + x.

A) Sally will never take a bet if there is a chance that it leaves her with wealth less than $16,000.
B) Sally will be risk neutral if her income is less than $8,000 and risk averse if her income is more than $8,000.
C) Sally will be risk averse if her income is less than $8,000 but risk loving if her income is more than $8,000.
D) For bets that involve no chance of her wealth exceeding $8,000, Sally will take any bet that has a positive expected net payoff.
E) None of the above.