Use the Following to Answer Questions

question 65

Multiple Choice

Use the following to answer questions:
Scenario: Health Costs
Alan is hoping for a healthy year, meaning that he would have zero health costs. Given his habits, there is a 40% chance that Alan will develop a health issue resulting in $50,000 in health costs. Assume these are the only two conditions that could exist for Alan in the coming year.
-(Scenario: Health Costs) Look at the scenario Health Costs. When Alan's probability of developing a health problem decreases, holding everything else constant, Alan's expected value of health care costs:

• A) increases.
• B) decreases.
• C) stays constant.
• D) increases, decreases, or stays constant.

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Definitions:

Bounded Rationality

A concept suggesting that individuals make decisions based on the limited information they have, constrained by their mental capacity and the time available.

Evidence-Based

An approach that involves making decisions or taking actions based on the systematic analysis of scientific evidence.

Bounded Rationality

A concept that decision-makers are limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision.

Temporal Immediacy

The urgency or closeness in time of an event, emphasizing the importance of timely action or response.