How Reasonable Is It for Someone to Rely on the Representativeness

question 237

Multiple Choice

How reasonable is it for someone to rely on the representativeness heuristic to make a quick judgment?

• A)Not reasonable at all-It is usually misleading.
• B)Often perfectly reasonable when there is no other information available.
• C)Reasonable when there is base rate information to refer to.
• D)Somewhat reasonable,but only if you put considerable thought into it first.

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Definitions:

Marginal Private Benefits

The additional benefit received by consumers or producers from consuming or producing one more unit of a good or service.

Negative Externalities

Unintended adverse effects on third parties not involved in an economic transaction, like pollution.

Monopolistic Competition

A market structure in which there are many competing producers in an industry, each producer sells a differentiated product, and there is free entry and exit into and from the industry in the long run.

Barriers To Entry

Factors that prevent or hinder new competitors from easily entering an industry or area of business.