tailieunhanh - Câu hỏi đánh giá môn Kinh tế vĩ mô bằng tiếng Anh- Chương 5

Tham khảo tài liệu 'câu hỏi đánh giá môn kinh tế vĩ mô bằng tiếng anh- chương 5', kinh tế - quản lý, kinh tế học phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | Chapter 5 Uncertainty and Consumer Behavior CHAPTER 5 UNCERTAINTY AND CONSUMER BEHAVIOR QUESTIONS FOR REVIEW 1. What does it mean to say that a person is risk averse Why are some people likely to be risk averse while others are risk lovers A risk-averse person has a diminishing marginal utility of income and prefers a certain income to a gamble with the same expected income. A risk lover has an increasing marginal utility of income and prefers an uncertain income to a certain income. The economic explanation of whether an individual is risk averse or risk loving depends on the shape of the individual s utility function for wealth. Also a person s risk aversion or risk loving depends on the nature of the risk involved and on the person s income. 2. Why is the variance a better measure of variability than the range Range is the difference between the highest possible outcome and the lowest possible outcome. Range does not indicate the probabilities of observing these high or low outcomes. Variance weighs the difference of each outcome from the mean outcome by its probability and thus is a more useful measure of variability than the range. 64 Chapter 5 Uncertainty and Consumer Behavior 3. George has 5 000 to invest in a mutual fund. The expected return on mutual fund A is 15 and the expected return on mutual fund B is 10 . Should George pick mutual fund A or fund B George s decision will depend not only on the expected return for each fund but also on the variability in the expected return on each fund and on George s preferences. For example if fund A has a higher standard deviation than fund B and George is risk averse then he may prefer fund B even though it has a lower expected return. If George is not particularly risk averse he may choose fund A even if it subject to more variability in its expected return. 4. What does it mean for consumers to maximize expected utility Can you think of a case where a person might not maximize expected utility The expected .