Microecon Week 8 Flashcards
(5 cards)
1
Q
People who always choose the option with a highest expected monetary value are?
A
Risk neutral
2
Q
People who always choose a sure thing over a gamble with the same expected monetary valaue are?
A
Risk averse
3
Q
People who will always choose fair gambles over certainties, and will sometimes choose a gamble that is unfair against them are?
A
Risk lovers
4
Q
What is a fair gamble?
A
A bet with an expected value of zero
5
Q
What is fair insurance?
A
When a premium equals the expected monetary value of a loss
