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Questions › JNU › JNU SIS 2020 › Q36
0 marksMicroeconomics › Choice under uncertainty › Risk aversion, certainty equivalent and risk premiumModerateabout 1 min

JNU SIS 2020 Question 36: Choice under uncertainty

A strictly risk averse individual is offered a choice between a gamble that pays 1000 with a probability of 25% and 100 with a probability of 75%, and a payment of 325 for sure. Which one of the following is true ?

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Answer and worked solution

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Choice under uncertainty has come up 27 times in 7 exams since 2007.

What this question tests

This question is on Risk aversion, certainty equivalent and risk premium, part of Choice under uncertainty in Microeconomics.

How the shape of utility reveals attitude to risk and how much a person would pay to avoid it.

TestStop has 16 past-paper questions on this subtopic; the nearest in year are below.

  • GATE 2021 · Q13Piku faces a lottery with outcomes of ₹24, ₹12, ₹48 and ₹6 given by the following probability distribution |…
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  • GATE 2021 · Q16Consider an individual who maximizes her expected utility having Bernoulli utility function u(w)=α-β…
Practise Choice under uncertaintyMore on Risk aversion, certainty equivalent and risk premium

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Question from the JNU SIS 2020 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.