Wanda Weeks has decided to stay in a lower-paying position with a local electric company rather than accept a much higher-paying job with a new information technology company. Use a risk model to explain her decision.
What will be an ideal response?
Wanda is exhibiting risk-aversion. The risk model shows the trade-offs risk-averse individuals are willing to make between higher average salaries and greater variance in compensation. The more preferred job for a risk-averse individual is the job that offers the best package of both expected compensation and variance of compensation, not the position with the highest expected compensation.
You might also like to view...
Refer to the figure above. The slope of the production function between ________ and ________ indicates negative returns to labor
A) Point B; Point C B) Point A; Point C C) Point A; Point B D) the origin; Point A
The estimated slope coefficient (b) of the regression equation (Ln Y = a + b Ln X) measures the ____ change in Y for a one ____ change in X
a. percentage, unit b. percentage, percent c. unit, unit d. unit, percent e. none of the above