(Solved): Suppose your classmate Edison offers you a wager: He will choose a playing card at random from a d ...

Suppose your classmate Edison offers you a wager: He will choose a playing card at random from a deck and pay you \( \$ 3,000 \) if it is red, but you have to pay him \( \$ 3,000 \) if it is black. Assume your wealth is currently \( \$ 9,000 \). The graph shown below plots your utility as a function of wealth. Use the graph to answer the questions that follow. The shape of your utility function implies that you are a individual, and, therefore, you accept the wager because the difference in utility between \( \mathrm{B} \) and \( \mathrm{A} \) is the difference between \( \mathrm{A} \) and \( \mathrm{C} \). Which of the following sentences most appropriately describe why the pain of losing \( \$ 3,000 \) is greater than the joy of winning \( \$ 3,000 \) for individuals who are risk averse? Check all that apply. Risk-averse people are relatively wealthy and simply do not need the additional money. Risk-averse people overestimate the probability of losing money. The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar. The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar.