Asked by Azooz AL-mohammdi on Jun 12, 2024
Verified
When making a decision, one should consider the desirability of each option, as well as the risks associated with each. This is the core of __________ theory.
A) loss aversion
B) utility
C) satisficing
D) decision maximization
Utility Theory
Utility theory is an economic model that explains how individuals make decisions based on the perceived value or benefit of the outcomes.
- Describe the fundamentals of utility theory and how it influences the process of making decisions.
Verified Answer
MJ
Michael J HulsteinJun 15, 2024
Final Answer :
B
Explanation :
The core of utility theory is to maximize the net benefits or utility of a decision by considering the desirability of each option and its associated risks. The other options are not as relevant to this approach. Loss aversion focuses on the fear of losing something rather than maximizing benefits. Satisficing is focused on finding a satisfactory solution rather than maximizing benefits. Decision maximization is not a recognized theory.
Learning Objectives
- Describe the fundamentals of utility theory and how it influences the process of making decisions.