Author Question: Foreign investment in poor nations often requires A) low rates of return to ensure the poor have ... (Read 206 times)

lunatika · **on:** Jun 29, 2018

Foreign investment in poor nations often requires

A) low rates of return to ensure the poor have a fair deal.
B) high rates of return to justify the high risk of such investment.
C) a constantly changing political structure to enhance profit opportunities.
D) the total elimination of uncertainty in order to guarantee economic profit.

Question 2

You are participating in a reality show in which you and several other competitors have been taken to an unknown place and asked to find your way to a destination using a map . You were doing a good job until you reached a crossroad.

Confused as to which way to take, you decided to take the road that most of your competitors chose. a) What is the term that is used to refer to such behavior? b) Why do people often behave in this way?

jojobee318 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

a) The term that is used to refer to such behavior is herding. Herding occurs when individuals conform to the decisions of others. In this case, you have chosen to follow your competitors and conform to their decisions.
b) In general, there are two reasons why individuals might decide to herd. The first may simply be that they are afraid of being wrongfor this reason, they might not value their own instincts highly. Another reason is the assumption that if many people are making the same decision, they must be doing so for a reason. Herding creates an informational equilibrium in which people trust the wisdom of others and ignore their own information.