Digital ACT Reading Practice Question #1575

According to prospect theory, how does the psychological impact of losing $100 compare to winning $100? Passage Excerpt (Social Science): Classical economic theory presumed that human beings are rational decision-makers who evaluate choices solely on expected utility. In the 1970s, psychologists Daniel Kahneman and Amos Tversky revolutionized economics by demonstrating that cognitive biases systematically skew human judgment. Their formulation of prospect theory revealed that people feel the psychological pain of a financial loss roughly twice as intensely as the pleasure of an equivalent gain—a phenomenon termed 'loss aversion.' Furthermore, human choices depend heavily on 'framing.' When a surgical procedure is presented as having a '90% survival rate,' patients overwhelmingly consent; when described as having a '10% mortality rate,' consent rates plummet, despite the mathematical identity of the two statements.