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(Figure: Risk Aversion Differences for Edward and Stephan) Use Figure: Risk Aversion differences for Edward and Stephan. An important reason that Edward and Stephen may
(Figure: Risk Aversion Differences for Edward and Stephan) Use Figure: Risk Aversion differences for Edward and Stephan. An important reason that Edward and Stephen may differ in their aversion to risk is: Graphs with two curves showing utility as a function of income. Edward's utility function has a slowly diminishing positive slope. Stephan's utility function s steeper than Edward's at lower income levels until it becomes tangent with Edward's and then the slope diminishes more quickly than Edward's as income rises. On the horizontal axis below the tangency point a loss of one hundred dollars and a gain of one hundred dollars are indicated. At both of these values Stephan's utility is lower than Edward's. Question 6 options: the way their marginal utility is affected by income. their understanding of risk. their initial wealth holding or initial income level. All of these answers are correct
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