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Answer: BSet 5: Inferences (Intermediate)
Explanation
PASSAGE
Behavioral economists have found that losses loom larger than equivalent gains—a phenomenon called loss aversion. In experiments, people require approximately twice as much potential gain to take a risk as they would need to compensate for a potential loss of the same size.
What can be inferred about human decision-making?
A. People evaluate gains and losses symmetrically.
B. Psychological weighting of outcomes skews toward avoiding losses over seeking gains.✓ Correct
C. Experimental subjects are completely rational.
D. Loss aversion has no effect on behavior.
Detailed Explanation
'Losses loom larger' + needing twice the gain = skew toward loss avoidance.
Key Evidence:
• "losses loom larger"
• "require twice as much potential gain"
Why others are wrong: A (Asymmetric: losses weighted more heavily.), C (This bias is irrational in economic terms.), D (It affects risk-taking behavior.).