Consider the Following Scenario When Answering the Following Questions

question 68

Multiple Choice

Consider the following scenario when answering the following questions:
Suppose that,in an experimental setting,100 students are presented with two situations involving risk and return.The students are first asked to choose between Gamble A and Gamble B,where:

Gamble A: The student will receive $1 million with a 100 percent probability.

Gamble B: The student will receive $1 million with an 89 percent probability,$5 million with a 10 percent probability,and $0 million (nothing) with a 1 percent probability.

The students are then asked to choose between Gamble C and Gamble D,where:

Gamble C: The student will receive $5 million with a 10 percent probability.

Gamble D: The student will receive $1 million with an 11 percent probability.
-According to the standard economic model (expected utility theory) ,a student who is risk averse would choose

• A) Gambles A and D because they both give the student a higher probability of winning something rather than nothing when compared to B and C,respectively.
• B) Gambles A and C because they both have higher expected values than B and D,respectively.
• C) Gambles B and C because they both have higher expected values than A and D,respectively.
• D) Gambles B and D because they both have higher expected values than A and C,respectively.
• E) Gambles B and C because they both have higher expected values than A and D,respectively

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Definitions:

Return Damaged Merchandise

The process of sending back products that are defective or damaged upon receipt to the seller for a refund, replacement, or credit.

Personal Characteristic

An individual's trait or attribute that defines their personality or habitual patterns.

Successful Salesperson

An individual who excels in persuading others to purchase products or services, typically characterized by high sales achievements and effective communication skills.

Extroversion

A personality trait characterized by an orientation of one's interests and energies toward the outer world of people and activities rather than the inner world of thoughts and feelings.