Consider the Following Prospects, in Which W₁ > W₂ >

question 48

Multiple Choice

Consider the following prospects, in which w₁ > w₂ > w₃; a: (1/3, 1/3, 1/3: w₁, w₂, w₃) ; b: (1/4, 1/2, 1/4: w₁, w₂, w₃) ; and c: (0, 1, 0: w₁, w₂, w₃) . Shelly reports that a is preferred to b, and that c is preferred to a.

• A)Shelly is risk inclined.
• B)Shelly is risk averse.
• C)Shelly is risk neutral.
• D)Her preferences are inconsistent with expected utility theory.

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Definitions:

Semantic Slanting

The deliberate choice of words to create specific emotional responses or to subtly influence perception.

Emotional Impact

The profound effect or influence that an experience, event, or communication has on a person's emotions or feelings.

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Kahneman and Tversky

Two psychologists renowned for their contributions to the understanding of judgment and decision-making psychology, alongside their work in behavioral economics.