A Decision Maker's Worst Option Has an Expected Value of $1,000

question 7

Multiple Choice

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. The decision maker has discovered a firm that will, for a fee of $1,000, make her position-risk free. How much better off will her firm be if she takes this firm up on its offer?

• A)$5,000
• B)$4,000
• C)$3,000
• D)$2,000
• E)$1,000

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Definitions:

Frustration and Aggression

A psychological theory suggesting that aggression is often the result of frustration, or the perception that you are being prevented from attaining a goal.

Frustration-Aggression Principle

A theory suggesting that frustration often leads to aggressive behavior, as one becomes increasingly thwarted in achieving their goals.

Goal is Blocked

A situation where an obstacle prevents an individual from achieving their desired outcome, leading to frustration or alternative strategies.

False Stereotypes

are incorrect or oversimplified generalizations about a group of people, which do not accurately reflect reality.