Suppose That, in an Experimental Setting, 100 Students Are Presented

question 94

Multiple Choice

Suppose that, in an experimental setting, 100 students are presented with two situations involving risk and return. The students are first asked to choose between Gamble A and Gamble B, where:
Gamble A: The student will receive $1 million with a 100% probability.
Gamble B: The student will receive $1 million with an 89% probability, $5 million with a 10% probability, and $0 million (nothing) with a 1% probability.
The students are then asked to choose between Gamble C and Gamble D, where:
Gamble C: The student will receive $5 million with a 10% probability.
Gamble D: The student will receive $1 million with a 11% probability.

-According to the standard economic model (expected utility theory) , a student who is risk neutral would choose:

• A) Gambles A and D because they both have higher expected values than B and C, respectively.
• B) Gambles A and C because they both have higher expected values than B and D, respectively
• C) Gambles B and C because they both have higher expected values than A and D, respectively.,
• D) Gambles B and D because they both have higher expected values than A and C, respectively..
• E) Gambles B and C because they both have higher expected values than A and D, respectively.

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Definitions:

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Descriptive Research

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Rational Manner

Thinking or behaving based on logic, reason, and careful consideration of facts rather than emotions or personal biases.

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The use of power and social networking within an organization to achieve changes that benefit the organization or individuals within it.