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Risk Aversion Suppose an individual has utility of wealth given by . Does this utility function exhibit positive marginal utility of wealth, i.e. is ?

  1. Risk Aversion

Suppose an individual has utility of wealth given by image text in transcribed.

  1. Does this utility function exhibit positive marginal utility of wealth, i.e. is image text in transcribed? What does this mean?
  2. Does this utility function exhibit increasing or decreasing marginal utility of wealth, i.e. is image text in transcribed, or image text in transcribed? What does this mean?
  3. Is this utility function consistent with risk aversion? Explain.
  4. Define what a risk premium is and why it is important.

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