Linda Committed a Traffic Violation That Resulted in an Accident

question 106

Multiple Choice

Linda committed a traffic violation that resulted in an accident.She learns first that the violation will result in a $500 fine;she then learns that she will have to pay another $500 for damage caused in the accident.According to prospect theory,

• A) she will suffer as much disutility from paying for the accident damage as she does from paying the fine.
• B) she will suffer less disutility from paying for the accident damage than from paying the fine.
• C) she will suffer more disutility from paying for the accident damage than from paying the fine.
• D) she will feel less disutility from paying $1,000 than she would receive positive utility from receiving $1,000.

---

Definitions:

Operating Cash Flows

The cash generated by a company’s normal business operations.

Payment Obligation

A financial commitment that requires a party to pay a certain amount of money by a specified date.

Character

In finance, character often refers to the qualitative assessment of a borrower's integrity and history in meeting debt obligations, used in credit analysis.

Capacity

The maximum amount that something can contain or produce, often used in the context of production and manufacturing facilities.