Different Cognitive Biases Can Threaten a Negotiator's Effective Problem Solving

question 21

Multiple Choice

Different cognitive biases can threaten a negotiator's effective problem solving and creativity.Of those threats,which of the following scenarios best illustrates the illusory correlation bias?

• A)A person hears that women living in San Francisco have a higher rate of breast cancer and concludes that living in San Francisco causes breast cancer.
• B)A student takes an aptitude test and scores poorly.Later that student learns that the test was mis-scored,but the student still feels like they failed.
• C)A person learns that 60% of a country's population is uneducated and that 70% of the crimes in that country are violent,and concludes that uneducated people are responsible for the violent crime rates.
• D)A person believes that morally "good" people are likely to win lotteries,and bad people are the victims of crimes

---

Definitions:

Expected Return

The mean of all potential investment returns, adjusted for the probability of each result occurring.

Security's Beta

A measure of an investment's volatility compared to the market as a whole, indicating its risk in relation to the market.

Risk Premium

The extra return expected from an investment for taking on additional risk.

Security Market Line

A graphical representation of the expected return of an asset compared to its risk, as measured by beta.