While Walking Down the Street, Buford Is Approached by a Stranger

question 33

Multiple Choice

While walking down the street, Buford is approached by a stranger, who makes the following offer: "Let's flip a coin. If it's heads, I'll give you $1,000. If it's tails, you give me your wristwatch." Buford figures that his wristwatch is only worth $600, but it was a gift from his grandmother that he cherishes, so he decides not to accept the stranger's offer. Buford's decision can be best characterized as based on:

• A) The sunk cost effect
• B) The availability bias
• C) The gambler's fallacy
• D) Expected value
• E) Expected utility

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Definitions:

Epinephrine

Also known as adrenaline, a hormone and a neurotransmitter that increases heart rate, muscle strength, blood pressure, and sugar metabolism.

Growth Hormone

A substance in humans and other animals that promotes growth, cell reproduction, and the healing of cells.

Antidiuretic Hormone

A hormone released by the pituitary gland that helps regulate the balance of water in the body by reducing the amount of water excreted by the kidneys.

Kidneys

Vital organs located in the back of the abdomen that filter blood to produce urine, regulate electrolytes, maintain acid-base balance, and regulate blood pressure.