Question 7What is the shape of the value function in prospect theory?1 pointGains: concave up; Losses: concave upGains: concave up, Losses: concave downGains: concave down; Losses: concave upGains: concave down; Losses: concave down

Question 1In the story of the Man in the Green Bathrobe, there is oneparticular feature of Prospect Theory that this gambler apparentlyviolates. Which feature?1 point Loss aversionRisk seeking over losses Risk aversion over gains

Please illustrate when the prospect theory resembles to expected utility theory based on the following formula: Expected Utility Theory E(U) =begin inline style sum from i equals 1 to N of end style P subscript i U left parenthesis w subscript i right parenthesis Prospect Theory E(v) = begin inline style sum for blank of end style pi left parenthesis p r subscript iota right parenthesis v left parenthesis x subscript iota minus r right parenthesis pi left parenthesis p r right parenthesis space equals space p r to the power of gamma space divided by space left square bracket p r to the power of gamma space plus space left parenthesis 1 minus space p r right parenthesis to the power of gamma right square bracket to the power of left parenthesis 1 divided by gamma right parenthesis end exponent

2.Question 2What problems does prospect theory solve? (check all that apply)1 pointPeople can underestimate high probabilities and overestimate low probabilitiesPeople do not treat gambles as equivalent to their expected utilityPeople will make big gambles to avoid lossesPeople will often make purchases impulsively

Making use of the information that is most readily available is referred to as ______________. Making assumptions based on stereotypes is referred to as _____________. Humans valuing losses more than they value gains describes ___________.1 pointAnchoring bias, Representative bias, Prospect theoryProspect theory, Representative bias, Game theoryAvailability bias, Representative bias, Prospect theoryAnchoring bias, Game theory, Prospect theory

Question 11Assume an investor recently purchased shares in Dynamo Products (a hypothetical company) at $60 per share. Shares are now at $40. See the three attached Prospect Theory value functions. Which of the value functions below correctly reflects the investor’s value function assuming:(1) The investor has updated his reference point for the price of the Dynamo shares?(2) The investor has not updated his reference point? 1 pointValue Function C reflects that the investor has updated his reference point, while Value Function C reflects that the investor has not updated his reference pointValue Function B reflects that the investor has updated his reference point, while Value Function A reflects that the investor has not updated his reference pointValue Function A reflects that the investor has updated his reference point, while Value Function C reflects that the investor has not updated his reference point Value Function C reflects that the investor has updated his reference point, while Value Function A reflects that the investor has not updated his reference point Value Function A reflects that the investor has updated his reference point, while Value Function B reflects that the investor has not updated his reference point Value Function B reflects that the investor has updated his reference point, while Value Function C reflects that the investor has not updated his reference point