According to Prospect Theory,when Faced with a Decision,people First

question 177

Multiple Choice

According to prospect theory,when faced with a decision,people first:

• A)consider base rates and then make a decision that results in guaranteed utility.
• B)calculate expected utility and then ignore alternative sources of information that may conflict with this subjective calculation.
• C)simplify available information and then make a decision that offers the best value.
• D)choose the best prospect and then seek out information to justify that decision.

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Definitions:

Maximizing Utility

The economic principle wherein individuals or firms seek to get the greatest satisfaction or return from their resources and choices, under the constraints they face.

Utility

A concept in economics that refers to the total satisfaction received from consuming a good or service.

X and Y

Often used in economic models to represent variables, products, or factors that can influence outcomes in analyses.

Consuming

The act of using up goods and services to satisfy wants or needs.