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Unformatted text preview: Name Final Exam, Econ 210A, December, 2010 Answer all five questions. Question 1. A) Define the ArrowPratt measure of absolute risk aversion. B) Consider the following von Neumann Morgenstern utility function u ( x ) = 1 e x . For what values of is a consumer with this utility function riskaverse? Does this consumer display increasing, decreasing, or constant absolute risk aversion? Explain. C) Consider the following von Neumann Morgenstern utility function u ( x ) = 1 x . For what values of is a consumer with this utility function riskaverse? Does this consumer display increasing, decreasing, or constant absolute risk aversion? Does this consumer display increasing, decreasing, or constant relative risk aversion? Explain D) Ulrich and Virgil have twicedifferentiable von Neumann Morgenstern util ity functions u ( x ) and v ( x ). Virgils utility function is given by v ( x ) = f ( u ( x )) where f ( ) is a strictly increasing and strictly concave function. Prove that Virgils is strictly more risk averse than Ulrich by the ArrowPratt mea sure of risk aversion. Question 2.Question 2....
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This note was uploaded on 12/25/2011 for the course ECON 210A taught by Professor Bergstrom during the Fall '09 term at UCSB.
 Fall '09
 Bergstrom
 Utility

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