Consider the Following Scenario to Answer the Questions That Follow

question 66

Multiple Choice

Consider the following scenario to answer the questions that follow.
Sarah and Laura are playing an ultimatum game where Laura is given an eight-slice pizza and asked to propose a way of splitting it with Sarah. When Sarah learns Laura's proposal, Sarah chooses whether to accept or reject the split. If Sarah accepts the split, both players receive the slices of pizza according to Laura's split proposal. If Sarah rejects the split, both players receive nothing. This game will be played only once, so Laura does not have to worry about reciprocity when making her choice. Assume that both players enjoy pizza and each would strictly prefer to eat more pizza than less.
-Which of the following is the fairest split proposal Laura can offer?

• A) Laura receives three slices and Sarah receives five slices.
• B) Laura receives one slice and Sarah receives seven slices.
• C) Laura receives two slices and Sarah receives five slices.
• D) Laura receives seven slices and Sarah receives one slice.
• E) Laura receives four slices and Sarah receives four slices.

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Definitions:

Insurance

A financial product that provides protection against potential financial losses or liabilities arising from specific risks.

Risk Averse

Describes individuals or entities that prefer to avoid risk and would rather choose options with more certain outcomes over riskier ones.

Insurance

A financial product that provides protection against potential future losses or damages in exchange for a premium.

Risk Neutral

A condition in which an individual or entity shows indifference between choices that have different levels of risk, focusing solely on potential outcomes regardless of uncertainty.