Stan, Who Is Risk Averse, Can Invest in Project a or Project

question 120

Multiple Choice

Stan, who is risk averse, can invest in project A or project B. Project A returns $3,000 with probability 1/2 and $9,000 with probability 1/2. Project B returns nothing with probability 1/2 and $12,000 with probability 1/2. For Stan, project A has

• A) greater expected wealth and greater expected utility than project B.
• B) lower expected wealth and lower expected utility than project B.
• C) the same expected wealth and the same expected utility as project B.
• D) the same expected wealth but higher expected utility than project B.

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Definitions:

Consciousness

The state of being awake and aware of one's surroundings, thoughts, feelings, and the self.

Psychology

The scientific study of the human mind and its functions, especially those affecting behavior in a given context.

Serial Processing

A method of information processing in which operations are carried out one after the other in a sequence.

Parallel Processing

The processing of many aspects of a problem simultaneously; the brain’s natural mode of information processing for many functions, including vision. Contrasts with the step-by-step (serial) processing of most computers and of conscious problem solving.