Consider the Following Scenario When Answering the Following Questions

question 50

Multiple Choice

Consider the following scenario when answering the following questions:
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 percent probability.
Gamble B: The student will receive $1 million with an 89 percent probability,$5 million with a 10 percent probability,and $0 million (nothing) with a 1 percent 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 percent probability.
Gamble D: The student will receive $1 million with an 11 percent probability.
-A student who is risk neutral would choose Gamble C,which has an expected value of ________,over Gamble D,which has an expected value of ________.

• A) $0.5 million; $1 million
• B) $0.5 million; $0.11 million
• C) $0.11 million; $1 million
• D) $1 million; $0.11 million
• E) $5 million; $1 million

Understand the principles and types of taxation.

Differentiate between progressive, regressive, and proportional taxes.

Identify the relationship between tax policies and their impact on different income groups.

Recognize the principle of benefits-received and ability-to-pay in the taxation system.