Participants Are Told,"Hospital a Has an Average of 45 Births

question 45

Multiple Choice

Participants are told,"Hospital A has an average of 45 births per day;Hospital B has an average of only 15 births per day." The participants are then asked,"Which hospital is more likely to have a day in which at least 60% of the babies born are female?" In answering the question,participants

• A)seem insensitive to the fact that departures from the average case are more likely with a smaller sample.
• B)seem insensitive to the fact that departures from the average case are more likely with a larger sample.
• C)correctly realize that departures from the average case are not dependent on hospital size.
• D)answer correctly,guided by the law of small numbers.

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Definitions:

Diversifiable Risk

The portion of an investment's risk that can be reduced or eliminated through the practice of diversifying one's investment portfolio across various assets.

Systematic Risk

The inherent risk affecting the overall market or a particular sector, which cannot be eliminated through diversification.

Market Risk

The risk of losses in investments due to factors that affect the entire market or asset class, such as economic changes or political events.

Firm-specific Risk

The type of risk that affects a particular company or industry, also known as unsystematic risk.