- Mon Nov 13, 2023 3:33 pm
#103983
Hi ashpine,
The problem with Answer E isn't that the answer is contrary to previous assumptions, but that the author wouldn't agree with this statement.
In lines 17-24, the passage states "previously, the notion that rational decision makers prefer risk-avoiding choices was considered to apply generally, epitomized by the assumption of many economists that entrepreneurs and consumers will choose a risky venture over a sure thing only when the expected measurable value of the outcome is sufficiently high to compensate the decision maker for taking the risk." This sentence is a description of the previous assumptions mentioned in Answer E.
The author doesn't disagree with this statement. The author agrees with this statement for the most part and provides the example that people generally would only be willing to gamble losing $100 for a 50% chance of winning at least $300.
Where the author does modify the previous sentiment begins in line 35, "Nevertheless, the recent studies indicate that risk-accepting strategies are common when the alternative to a sure loss is a substantial chance of losing an even larger amount, coupled with some chance-even a small one-of losing nothing." In other words, because people really hate to lose anything, they will risk a lot to try to prevent a loss even if the odds are not in their favor. This situation, however, is not what Answer E is describing and not what the author states.