Consider the Following Scenario When Answering the Following Questions

question 87

Multiple Choice

Consider the following scenario when answering the following questions:
Suppose that,in an experimental setting,100 students are presented with two situations involving risk and return.The students are first asked to choose between Gamble A and Gamble B,where:

Gamble A: The student will receive $1 million with a 100 percent probability.

Gamble B: The student will receive $1 million with an 89 percent probability,$5 million with a 10 percent probability,and $0 million (nothing) with a 1 percent probability.

The students are then asked to choose between Gamble C and Gamble D,where:

Gamble C: The student will receive $5 million with a 10 percent probability.

Gamble D: The student will receive $1 million with an 11 percent probability.
-According to the standard economic model (expected utility theory) ,a student who is risk neutral would choose Gambles ________ because they both have higher expected values than ________,respectively.

• A) A and D; B and C
• B) A and C; B and D
• C) B and C; A and D
• D) B and D; A and C
• E) B and C; A and D.

---

Definitions:

Papule

A small, raised, solid pimple or swelling on the skin that is often part of an acne outbreak or skin condition.

Vesicle

A small fluid-filled blister on the skin or within the body, often serving as a means of transport for lipids, proteins, and other molecules in the cell.

Petechiae

Small, pinpoint, red spots on the skin caused by minor bleeding from broken capillary blood vessels.

Lyme Disease

An infectious disease caused by Borrelia bacteria, transmitted to humans through the bite of infected black-legged or deer ticks.