Regina and Brenda Are Considering Playing a Game Called Matching

question 36

Multiple Choice

Regina and Brenda are considering playing a game called Matching Twenties.In this game,Regina and Brenda will each place a $20 bill on the table.Both players will then toss a fair coin.If both Regina and Brenda toss heads or both Regina and Brenda toss tails,Regina wins the $40 on the table.If one woman tosses heads and the other tosses tails,Brenda wins the $40 on the table.
Regina decides that she is not willing to play this game because a loss of $20 to Brenda would cause her to lose more utility than she would gain if she won $20 from Brenda.Which concept best explains Regina's choice not to play the game?

• A) hedonic editing
• B) gain aversion
• C) prospect theory
• D) signaling
• E) gain-loss asymmetry

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Definitions:

Breakeven Point

The point at which total costs and total revenues are equal, resulting in no net loss or gain for the business.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production.

Fixed Costs

Expenses that do not vary with the level of production or business activity within a certain range.

Price Elastic

A measure of how much the demand for a product or service changes in response to a change in its price.