Why Is the Concept of Base Rate Important in Decisions

question 24

Multiple Choice

Why is the concept of base rate important in decisions that involve the representativeness heuristic?

• A)People usually don't pay enough attention to base rate when making these decisions.
• B)People are so aware of information about base rate that they typically make accurate decisions.
• C)People rarely make the small-sample fallacy when making these decisions.
• D)When people have a background in statistics,they are much more likely to make correct decisions on tasks involving the representativeness heuristic.

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Definitions:

Consumer Goods

Consumer goods are products bought by individuals or households for personal use, such as clothing, food, and household items.

International Specialization

The practice of countries focusing on the production of goods and services for which they have a comparative advantage, leading to trade.

Production Possibilities Curve

A graphical representation that shows the maximum combination of goods and services that can be produced by an economy, given its available resources and technology.

Productive Efficiency

A situation in which an economy or production system cannot produce more of one good without reducing the output of another good, indicating optimal production resource usage.