ParadoxDiff: Medium

Logic Breakdown

Passage Summary: People value a mug much lower when they are the ones buying it than when they are the ones selling it.

Reasoning: Participants in a study were unwilling to pay more than $5 to buy a mug, but when they owned a similar mug, they were unwilling to sell it for less than $5.

Analysis: This stimulus presents a classic psychological paradox known as the 'endowment effect.' The discrepancy is that the 'market value' of the mug changes depending on whether the participant is the buyer or the owner. To resolve this, we need a piece of information that explains why the act of possession increases the perceived value of an object. Look for an answer that suggests people have an inherent bias toward keeping what they already have or that they perceive losing an item as a greater 'cost' than the 'gain' of acquiring it.

Passage Stimulus

Passage Redacted

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3.

Which one of the following, if true, most helps to resolve the apparent discrepancy described above?

Correct Answer
D
It states that people value objects they already own more than similar objects they don’t own, explaining why selling prices exceed buying prices for the same kind of mug.
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