A utility function expresses:

A utility function expresses:
A . Risk probabilities
B . Risk alternatives
C . Risk assessment
D . Risk attitude

View Answer

Answer: D

Explanation:

A utility function provides a description of an individual or a firm’s risk attitude. It expresses how risk seeking or risk averse a firm or an individual is. The utility function would explain differences between risk seeking and risk averse behavior, for example, as an individual becomes richer, he may seek (or shun) risk more than before. A utility function incorporates all of this, and therefore Choice ‘d’ is the correct answer.