When Does the Representativeness Heuristic Lead to an Incorrect Conclusion?​

question 172

Multiple Choice

When does the representativeness heuristic lead to an incorrect conclusion?​

• A)When it is more important to choose high quality than low price
• B)​When we are dealing with a category that is easy to define
• C)​When we overlook base-rate information
• D)​When we are making a decision based on much information

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Definitions:

Standard Deviation

A statistic that measures the dispersion or variability of a dataset relative to its mean, commonly used in finance to assess the volatility of investment returns.

Security Market Line

A representation in the Capital Asset Pricing Model (CAPM) that displays the relationship between the expected return of an investment and its risk.

Expected Return

The anticipated profit or loss from an investment over a given period, based on historical averages or statistical analyses.

Risk-Free Rate

The return on an investment with zero risk, typically represented by government securities.