final10 - Name Final Exam, Econ 210A, December, 2010 Answer...

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Unformatted text preview: Name Final Exam, Econ 210A, December, 2010 Answer all five questions. Question 1. A) Define the Arrow-Pratt 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 risk-averse? 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 risk-averse? 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 twice-differentiable 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 Arrow-Pratt 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.

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final10 - Name Final Exam, Econ 210A, December, 2010 Answer...

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