Suppose that Ike is loss averse. In the morning, Ike's stockbroker calls to tell him that he has gained $1000 on his stock portfolio. In the evening, his accountant calls to tell him that he owes an extra $1000 in taxes.
The dollar value of the gain in his stock portfolio exactly offsets the amount of extra taxes he has to pay. In this case,
a) Ike has an increase in utility because he prefers the gain to the loss.
b) Ike is neutral because the loss is offset by the gain.
c) because Ike is loss averse, he is worse-off in terms of utility.
d) Ike has a decrease in utility because the loss came after the gain.