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From the following two statements, choose the correct answer:
Statement I: A person can have one utility curve for one situation and a quite different one for the next situation.
Statement II: Business executive with a linear utility curve can effectively use the expected monetary value as their decision criterion.
Statement II: Business executive with a linear utility curve can effectively use the expected monetary value as their decision criterion.
- a)Statements I and II are true.
- b)Statement I is false, but II is true.
- c)Statement I is true, but II is false.
- d)Statements I and II are false.
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
From the following two statements, choose the correct answer:Statement...
Utility is a level of satisfaction one gets from using particular product. Utility from one product is differed from other product and thus utility curve too. 1st statement says that a person can have one utility curve for one situation and a quite different one for the next situation. So, it is a correct statement.
Linear utility curves shows bundles of goods in which consumers are indifference. Consumers get the same satisfaction from buying any of the products. So, if the business executive have linear utility curve then he can effectively use the expected monetary value as their decision criterion. So, this is also a correct statement.
And therefore Both the statements are true.
Linear utility curves shows bundles of goods in which consumers are indifference. Consumers get the same satisfaction from buying any of the products. So, if the business executive have linear utility curve then he can effectively use the expected monetary value as their decision criterion. So, this is also a correct statement.
And therefore Both the statements are true.
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From the following two statements, choose the correct answer:Statement...
Understanding the Statements
Statement I discusses the variability of utility curves in different situations. A utility curve represents an individual’s preferences regarding risk and reward. In various contexts—such as investing, gambling, or consumer choices—people may assess risks and outcomes differently. Hence, it is accurate that one person can possess distinct utility curves for different situations.
Statement II and Linear Utility Curves
Statement II refers to business executives using linear utility curves. A linear utility curve implies a constant marginal utility of wealth, meaning that the decision-maker evaluates risk and reward in a straightforward, additive manner. In this case, using expected monetary value (EMV) as a decision criterion is effective because EMV simplifies decision-making by providing a clear average outcome based on probability.
Conclusion
Both statements are true as they accurately reflect the nature of utility theory and decision-making:
- Statement I: True, as utility curves can vary per situation.
- Statement II: True, since a linear utility curve facilitates the use of EMV for decision-making.
Thus, the correct answer is indeed option 'A', confirming that both statements are true.
Statement I discusses the variability of utility curves in different situations. A utility curve represents an individual’s preferences regarding risk and reward. In various contexts—such as investing, gambling, or consumer choices—people may assess risks and outcomes differently. Hence, it is accurate that one person can possess distinct utility curves for different situations.
Statement II and Linear Utility Curves
Statement II refers to business executives using linear utility curves. A linear utility curve implies a constant marginal utility of wealth, meaning that the decision-maker evaluates risk and reward in a straightforward, additive manner. In this case, using expected monetary value (EMV) as a decision criterion is effective because EMV simplifies decision-making by providing a clear average outcome based on probability.
Conclusion
Both statements are true as they accurately reflect the nature of utility theory and decision-making:
- Statement I: True, as utility curves can vary per situation.
- Statement II: True, since a linear utility curve facilitates the use of EMV for decision-making.
Thus, the correct answer is indeed option 'A', confirming that both statements are true.
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From the following two statements, choose the correct answer:Statement I: A person can have one utility curve for one situation and a quite different one for the next situation.Statement II: Business executive with a linear utility curve can effectively use the expected monetary value as their decision criterion.a)Statements I and II are true.b)Statement I is false, but II is true.c)Statement I is true, but II is false.d)Statements I and II are false.Correct answer is option 'A'. Can you explain this answer?
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