In Order to Illustrate the Basic Economic and Psychological Dynamics

question 25

Multiple Choice

In order to illustrate the basic economic and psychological dynamics involved in purchasing life insurance,one can create a very simple game with a sack,one black marble,and three white marbles.In this game,the four marbles are placed in the sack,and the player must pay a "premium" of $5 for each draw he makes from the sack.The previously-drawn marbles are not returned to the sack so,if he keeps playing,the player is guaranteed to win the $12 award eventually (but at what cost?!) .Use a simulation to predict the average cost to win the $12 assuming the player continues playing until he gets the black marble.Use 30 simulation runs,letting a random number give the number of draws to obtain the black marble on a particular run.

• A)About $20.50
• B)About $12.50
• C)About $5.00
• D)About $17.00
• E)About $15.50

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Definitions:

Intermittent Explosive Disorder

An emotional disturbance identified by intense outbursts of anger, significantly beyond what the situation warrants.

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A class of drugs typically used in the treatment of depression and anxiety disorders that work by increasing the levels of serotonin in the brain.

Norepinephrine

A neurotransmitter and hormone involved in the body's fight or flight response, affecting heart rate, blood flow, and blood pressure.