One major consequence of the availability heuristic is that:

a. People may spend more resources to insure themselves against rare events, but leave themselves uninsured against more common events

b. Someone could persist in pursuing a failed policy despite overwhelming evidence of the failure

c. Bad decisions can be made because people will act without pausing to see whether their intuition is correct or not

d. Some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments

Question

Business

Pierce Trevino

13 March, 05:45

One major consequence of the availability heuristic is that:

a. People may spend more resources to insure themselves against rare events, but leave themselves uninsured against more common events

b. Someone could persist in pursuing a failed policy despite overwhelming evidence of the failure

c. Bad decisions can be made because people will act without pausing to see whether their intuition is correct or not

d. Some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments

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Answers (1)

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Mila Newton · Answer 1

The correct answer is letter "D": Some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments.

Explanation:

Availability heuristic refers to the association of ideas to capitalize on them as absolute truths. People tend to take an example of a given situation that could be facts but they generalize them for every single similar event which could lead them to make wrong assumptions.

This practice is seen in many fields being investing one of them. Individuals assume that because a given investment was profitable under certain characteristics it will always work in the same pattern. However, forecasting the profitability of an investment in such a way could lead to wrong outcomes. The situation gets worse while estimating the returns of risky investments.