Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They will prefer the guaranteed gain regardless of framing.
B
They will prefer the 50% chance of winning $250 if framed in terms of potential loss.
C
They will prefer the guaranteed gain more if it is framed as a loss rather than a gain.
D
Their choice will remain the same regardless of how the options are framed.
Understanding the Answer
Let's break down why this is correct
Answer
Prospect theory suggests that how a decision is presented, or "framed," can greatly influence our choices. If the decision is framed as a guaranteed gain of $100, people may feel more secure and prefer the sure amount because it feels safe and certain. On the other hand, if the choice is framed in terms of the chance to win $250, the excitement of the potential larger reward might draw people in, despite the risk of getting nothing. For example, if someone thinks about winning a larger prize, they might choose the 50% chance even though the guaranteed $100 is a sure bet. This shows that our emotions and perceptions can change the way we make decisions, leading us to choose differently based on how options are presented.
Detailed Explanation
When people see a chance of losing something, they often take bigger risks. Other options are incorrect because Some might think everyone always chooses the safe option; This idea suggests that framing a gain as a loss makes people want it more.
Key Concepts
Prospect theory
Framing effect
Topic
Behavioral Economics and Decision-Making
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.