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.

---

Definitions:

Deadly Sins

Traditionally, a classification of the most serious vices in Christian teachings, which are believed to sever the connection with God.

Over Planning

The practice of spending too much time or effort on planning, which can sometimes lead to diminished efficiency or missed opportunities.

Unlimited Optimism

A mindset wherein an individual maintains a persistently positive outlook regardless of circumstances.

Conceptual Skill

The ability to understand complex ideas and concepts, often allowing for innovative problem solving and strategic planning.