In Developing Prospect Theory, Which of the Following Did Behavioral

question 155

Multiple Choice

In developing prospect theory, which of the following did behavioral economists not discover about people's reaction to goods and bads?

• A)People feel equivalent losses and gains in equal measure, supporting the assumption that consumers behave rationally.
• B)People are generally loss averse, feeling losses more intensely than gains.
• C)People judge good and bad outcomes relative to the status quo.
• D)People experience both diminishing marginal utility from gains and diminishing marginal disutility from losses.

---

Definitions:

Pricing Model

A method or algorithm used to determine the selling price of a product or service, taking into account costs, market conditions, and profit margins.

Standard Deviation

A statistical measure of the dispersion or variance in a set of data points, widely used to assess the risk associated with a financial asset's return.

Call Option

A financial contract that gives the option buyer the right, but not the obligation, to buy a specified quantity of an asset at a set price within a specific time frame.

Value Increase

An appreciation in the worth or market value of an asset or investment over time.