Question from Past Microeconomics Qualifying ExamEdit
Fall 1999- Section I, Question six, George Mason University
True, False, Uncertain. Determine whether or not each of the following statements are true or false. Explain your reasoning briefly in a paragraph or two. (The explanation is often more important than the answer given). Include a carefully labeled diagram or game matrix if it helps to clarify your answer.
If Al is indifferent between playing and not playing a fair lottery, Al must be risk neutral.
A person is said to be risk neutral if he is generally indifferent between accepting or refusing a fair gamble, because the expected utility of accepting is the same as the certain utility of refusing