Assumptions of rationality are violated because Choose one: A. both low-probability events and high-probability events are underanticipated. B. low-probability events are overanticipated whereas high-probability events are underanticipated. C. low-probability events are underanticipated whereas high-probability events are overanticipated. D. both low-probability events and high-probability events are overanticipated.
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Assumptions of rationality are violated because
Choose one:
A. both low-probability events and high-probability events are underanticipated.
B. low-probability events are overanticipated whereas high-probability events are underanticipated.
C. low-probability events are underanticipated whereas high-probability events are overanticipated.
D. both low-probability events and high-probability events are overanticipated.
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- __ 2. According to the classical definition of probability a. All the events are equally likely. b. The probability is based on hunches. c. Divide the number of successes by the number of failures. d. One outcome is exactly twice the other.The marginal utility of income for a risk-averse individual will be: Select one: a. diminishing. b. constant. c. increasing. d. unknown; the answer depends on the value of income.Consider Bob's decision problem: Sunny Cloudy Rainy Beach 2 3 2 Park 3 3 2 Mall -1 1 x Suppose the probability of Sunny is 0.25, the probability of Cloudy is 0.25, and the probability of Rainy is 0.5. What is the smallest value of x for which Mall is an expected utility maximiser? Round your answer to one decimal place (e.g. 0.5).
- a. Consider the Oakdale Furniture Company described in the given problem. Under what circumstances might the major portion of the usage of the glue be predictable?b. If the demand were predictable, would you want to use a probability law todescribe it? Under what circumstances might the use of a probability model of demand be justified even if the demand could be predicted exactly?Suppose that an individual is just willing to accept a gamble to win or lose $1000 if the probability ofwinning is 0.6. Suppose that the utility gained if the individual wins is 100 utils. How much utility does one lose if one loses the gamble?Probability is the likelihood or chance of an event occurring. Discuss its significance in real life. Develop a hypothesis about any real life occurring phenomena and calculate probability by using hypothetical values.
- 1 Consider an individual for whom utility is U = ln(I) There are two states of the world (G,B): Outcome G = 2000 with probability .4 Outcome B = 1000 with probability .6 W1 = 2000 L = 1000 π = .6 Option = invest $50 to lower π to .2 An insurance company is willing to offer a contract in which the individual pays a premium and gets full compensation for the loss (1000) in the bad state. a) With no insurance but the option of investing the $50, what is the utility of the individual? b) What is the first-best outcome for utility of the individual, insurance premium, and profits of the insurance company?A farmer believes there is a 50–50 chance that the next growing season will be abnormally rainy. His expected utility function has the form expected utility =;In Y NR +;In YR, where YNR and YR represent the farmer's income in the states of “normal rain" and "rainy," respectively. a. Suppose the farmer must choose between two crops that promise the following income prospects: Crop YNR YR Wheat $28,000 $10,000 $15,000 Corn $19,000 Which of the crops will he plant? b. Suppose the farmer can plant half his field with each crop. Would he choose to do so? Explain your result. c. What mix of wheat and corn would provide maximum expected utility to this farmer? d. Would wheat crop insurance-which is available to farmers who grow only wheat and which costs $4,000 and pays off $8,000 in the event of a rainy growing season-cause this farmer to change what he plants?The application which provides a way of revising conditional probabilities by using available information and provisions for revising conditional probabilities with other information that is useful for management decision making is called? Select one: a. Bayes’ theorem. b. overinvolvement ratios. c. probability rules. d. empirical formula.
- Whether a certain criterion is determinant or not is independent of the situation in which a product is consumed. True False In the context of disposing of consumer refuse, recycling cuts down on garbage while providing raw materials for other new products. True False Which of the following is a fundamental emotion evoked by positive, anticipatory appraisals that signal uncertainty about a positive outcome? a. Hope b. Confusion c. Surprise d. Pride Which of the following best describes chronic, repetitive purchasing behaviors that are in response to negative events or feelings? a. Addictive consumption b. Impulsive purchasing c. Window shopping d. Compulsive buying Retaliatory revenge is when a consumer yells insults and makes a public scene in an effort to harm the business. True FalseWho is most risk-averse? a-an individual with slightly diminishing marginal utility. b-all individuals are equally risk-averse. c-an individual with rapidly diminishing marginal utility. d-an individual who does not experience diminishing marginal utility.If a person's utility doubles when their income doubles, then that person is risk... a. averse. b. seeking. c. There is not enough information given in the question to determine an answer. d. neutral.