-James Has a Utility of Wealth Schedule in the Above

question 220

Multiple Choice

-James has a utility of wealth schedule in the above table. He is offered a job selling video games at Games Galore. James' compensation depends on how much he sells. In a poor sales period, a salesperson makes $100 per month. In a good sales period, a salesperson makes $600 per month. James is told by the manager that, in any given month, there is a 25 percent chance of a poor sales period and a 75 percent chance of a good sales period. Suppose that one of James' professors offers him the opportunity to be a research assistant for a fixed and guaranteed amount each month. Comparing the two opportunities, working at Games Galore versus being a research assistant, what is James' cost of risk?

• A) $125 per month
• B) $175 per month
• C) $375 per month
• D) $500 per month

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Definitions:

Operant Conditioning

The control of behaviour by manipulating its consequences.

Unpleasant Consequence

An adverse or negative outcome that follows an undesired behavior, serving as a deterrent.

Operant Conditioning

A learning process through which the strength of a behavior is modified by reinforcement or punishment.

Law Of Effect

A principle of behaviorism stating that actions which produce satisfying outcomes are more likely to be repeated, while those that produce unpleasant outcomes are less likely to be repeated.