Diminishing marginal utility of wealth leads to risk aversion because at a given level of wealth a dollar gained
A) is worth more in additional utility than a dollar lost.
B) is worth less in additional utility than a dollar lost.
C) is worth as much in additional utility as a dollar lost.
D) does not add to total utility.
B
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(Consider This) Kara was earning $40,000 per year. When her income rose to $60,000 per year, she enjoyed the higher level of consumption for a while, but eventually she was no more happy than when she earned $40,000 (assume prices didn't change over
this time period). Economist Richard Easterlin described this as: A. anchoring. B. the endowment effect. C. irrational economic behavior. D. the hedonic treadmill.
Related to the Economics in Practice on page 151: Which of the following is the best analysis of the question of how fast delivery truck drivers should drive in order to reduce costs?
A. They should drive as quickly as possible in order to make more deliveries per day. B. They should balance the concerns of speed and fuel efficiency and drive at a speed that minimizes total expenses. C. They should drive at the most fuel - efficient rate in order to reduce fuel consumption costs. D. They should drive as close to the legal speed limit as possible