Question

John​ Brown's utility of income function​ is: U​ = ​log(I ​+ 1​), where I represents income. From this​ information, you can say that: A. John Brown is risk averse. B. John Brown is risk loving. C. John Brown is risk neutral. D. We need more information before we can determine John​ Brown's preference for risk.

Answer 1

Answer:

(A) John Brown is risk averse.

Explanation:

From the information given, it is clear that John Brown is avoiding risk. The marginal utility of income is diminishing so John Brown is risk averse.