Economics · Microeconomics
Assertion (A): If an individual's utility function is concave in wealth, then the certainty equivalent of any risky prospect is less than its expected value. Reason (R): Concavity of utility implies diminishing marginal utility of wealth.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A is false but R is true
- 2A is true but R is false
- 3Both A and R are true but R is not the correct explanation of A
- 4Both A and R are true and R is the correct explanation of A✓
Correct answer
Both A and R are true and R is the correct explanation of A
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