The next three questions are related to the following information. Assume an eco

Question

The next three questions are related to the following information. Assume an economic agent has the option to select between two options A and B. Assume option A and B both have an expected value of 10. The variance of option A is higher than B. If the economic agent selects alternative B then we would conclude that he/she is: risk averse 6. a. b. risk neutral c.risk seeking 7. Given your answer in question 6, the risk aversion coefficient for this agent would be: b. less than zero c. equal to zero greater than zero Given your answer in question 6, if we wish to convince the agent to select option A we would have to Increase, variance, b. hold constant, variance, c. increase, expected value, d. decrease, expected value a. 8. the of option A. a.

Explanation / Answer

6.) Risk averse. Since he is not choosing a variable with high variance and hence avoiding risks.

8.) Hold constant , variance

9.) None of the above .

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