John Brown's utility of income function is: U = log (I + 1 ), where I represents income. From this information, you can say that: A. John Brown is risk averse. B. John Brown is risk loving. C. John Brown is risk neutral. D. We need more information before we can determine John Brown's preference for risk.

Question

Business

Philip Hatfield

4 May, 03:14

John Brown's utility of income function is: U = log (I + 1 ), where I represents income. From this information, you can say that: A. John Brown is risk averse. B. John Brown is risk loving. C. John Brown is risk neutral. D. We need more information before we can determine John Brown's preference for risk.

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Answers (1)

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Chanel Walton · Answer 1

(A) John Brown is risk averse.

Explanation:

From the information given, it is clear that John Brown is avoiding risk. The marginal utility of income is diminishing so John Brown is risk averse.