One Assumption of Prospect Theory Is Called the Certainty Effect

question 158

Multiple Choice

One assumption of prospect theory is called the certainty effect.This means that:

• A)when making decisions,people give greater weight to outcomes that are a sure thing.
• B)people are certain that they want to avoid risk but are unsure that they want to maximize gains.
• C)when making decisions,people rely more on past outcomes than on future speculations.
• D)people are certain that they want to maximize gains but are unsure that they want to avoid risks.

---

Definitions:

Socioeconomic Character

Refers to the social and economic attributes that define the status or characteristics of individuals or groups within a society.

Duty of Loyalty

A legal obligation of fiduciaries, such as company directors and trustees, to act in the best interest of the entity or person they represent.

Actual Financial Loss

A monetary loss that can be quantified or accurately measured, resulting from specific events like theft or litigation.

Negligent

Describes a failure to exercise the care that a reasonably prudent person would exercise in like circumstances, leading to unintended damage or harm.