When Deciding Between Playing a Lottery with an 80% Chance

question 4

Multiple Choice

When deciding between playing a lottery with an 80% chance of winning $4,000 or receiving $3,000 outright,most people choose the _____ because of the _____.

• A)lottery;preference for variable rewards
• B)lottery;rational choice theory
• C)$3,000;sunk-cost fallacy
• D)$3,000;certainty effect

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Definitions:

Economic Theory

A framework or set of principles explaining how economies function and how economic agents interact.

Quota Rent

The extra profit that producers can make when supply is artificially restricted by an import quota.

Demand Price

The highest price that consumers are willing to pay for a good or service at a given quantity.

Supply Price

The lowest price at which a seller is willing to sell a good or service, influenced by costs of production and market demand.