5 Risk, Value, and Choice Online Quiz Questions

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Prospect theory is a normative framework; expected utility is a descriptive account.

Expected utility is a normative framework; prospect theory is a descriptive account.

Both are descriptive accounts of actual choices.

Both are normative frameworks that prescribe the same choice.

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It evaluates only final wealth and is unaffected by how an outcome is described.

It evaluates gains and losses relative to a reference point, so framing can affect how an option feels.

It assumes that people always choose the option with the highest expected monetary value.

It applies only when probabilities are unknown.

It is often concave for gains, which can encourage risk aversion.

It is always linear for gains and losses.

It is often convex for losses, which can encourage risk seeking.

It is steeper for losses than for comparable gains near the reference point.

Expected utility weights utility by stated or believed probabilities.

Prospect theory may transform probabilities into decision weights.

Expected utility evaluates gains and losses only relative to a reference point.

Prospect theory evaluates gains and losses relative to a reference point.

It is uncertainty, because the outcomes have not happened yet.

It is risk, because the probabilities of the outcomes are known or can be estimated.

It is uncertainty, because every choice has more than one possible outcome.

It is risk only if the most likely outcome is also the most desirable.

Utility is always the exact monetary amount of an outcome.

Utility measures only how likely an outcome is.

Utility represents how desirable an outcome is to the decision-maker and need not equal its monetary amount.

Utility is the difference between the best and worst possible monetary outcomes.

The gamble must be preferred because its expected monetary value is higher.

The guaranteed $40 may be preferred if the person's utility for money increases at a diminishing rate.

The guaranteed $40 must be preferred because certain outcomes always have greater utility.

The options cannot be compared unless their probabilities are unknown.

Concave for gains and convex for losses, which can encourage risk aversion for gains and risk seeking for losses.

Convex for gains and concave for losses, which can encourage risk seeking for gains and risk aversion for losses.

Concave for both gains and losses, which encourages risk aversion in both cases.

Convex for both gains and losses, which encourages risk seeking in both cases.

The probability assigned to each possible outcome.

The objectively most likely outcome of the choice.

A baseline, such as the person’s current situation or expectations, against which outcomes are judged as gains or losses.

The largest gain available among all possible choices.

It assumes that people always calculate the exact mathematical expectation.

It allows people to use psychological decision weights that differ from stated probabilities.

It replaces probabilities with the monetary size of each outcome.

It applies only when probabilities are completely unavailable.

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