Linda committed a traffic violation that resulted in an acci

Linda committed a traffic violation that resulted in an accident. She learns first that the violation will result in a $500 fine; she then learns that she will have to pay another $500 for damage caused in the accident .According to prospect theory,

A. she will suffer as much disutility from paying for the accident damage as she does from paying the fine.

B. she will suffer less disutility from paying for the accident damage than from paying the fine.
C. she will suffer more disutility from paying for the accident damage than from paying the fine.
D. she will feel less disutility from paying $1,000 than she would receive positive utility from receiving $1,000.

Solution

The correct answer is option. A. Linda will suffer as much disutilityfor paying for accident damage as she does for paying the fine.