In an Experiment on Risk Aversion, a Group of People

question 8

Multiple Choice

In an experiment on risk aversion, a group of people were given the following choice: A) Lose $100 with certainty, or B) 50% chance to win $50, 50% chance to lose $200.An overwhelming majority chose option B.This can be best explained by which of the following?

• A)People have a greater aversion to loss than to risk.
• B)Option B has a smaller expected loss than option A.
• C)This behavior is consistent with risk aversion with losses.
• D)Option B has an expected gain as opposed to certain loss with option A.
• E)This behavior violates the Weak Axiom of Revealed Preference.

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Definitions:

Attitudes

An individual's settled way of thinking or feeling about someone or something, typically reflected in their behavior.

Behaviors

The range of actions and mannerisms exhibited by individuals, organisms, or systems in conjunction with their environment.

Major Types

Depicts categories or principal varieties within a broader classification.

Emotions

Complex psychophysiological experiences that result from the interpretation of personal significance of a particular event or situation.