In an Experiment on Risk Aversion, a Group of People

question 8

Multiple Choice

In an experiment on risk aversion, a group of people were given the following choice: A) Lose $100 with certainty, or B) 50% chance to win $50, 50% chance to lose $200.An overwhelming majority chose option B.This can be best explained by which of the following?

• A)People have a greater aversion to loss than to risk.
• B)Option B has a smaller expected loss than option A.
• C)This behavior is consistent with risk aversion with losses.
• D)Option B has an expected gain as opposed to certain loss with option A.
• E)This behavior violates the Weak Axiom of Revealed Preference.

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Definitions:

Federal Theater Project

A New Deal program to fund theatre and other live artistic performances and entertainment programs in the United States during the Great Depression.

Conservatives

Individuals or political groups that favor retaining traditional social institutions, values, and practices, typically resisting abrupt change.

New Deal

A collection of initiatives, including public works schemes, economic reforms, and regulations implemented by President Franklin D. Roosevelt in the United States throughout the 1930s, designed to aid in recovery from the Great Depression.