Kim and Abe Participate in a Psychology Experiment

question 213

Multiple Choice

Kim and Abe participate in a psychology experiment.At the end of the study,they are offered either $10 or a chance to be entered into a drawing where there is a 10 percent chance of winning $100.Kim's parents are supporting her through college,paying her expenses,and giving her a generous allowance.Abe is putting himself through school with jobs and loans.Prospect theory would predict that Kim will choose the _____ and Abe will choose the _____.

• A) drawing; $10
• B) drawing; drawing
• C) $10; $10
• D) $10; drawing

---

Definitions:

Consumer Surplus

The gap between the total sum consumers are ready and able to spend on a good or service versus the total sum they actually spend.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service relative to its market price, representing the economic benefit to consumers.

Demand Curve

A visual depiction that illustrates the correlation between a product's price and the amount consumers want to buy.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.