Question 12 • FL-2102373-Personal Finance and Money Management Honors
Read the passage.Max's first guitar holds a special place in his heart. Despite being offered a fair price for it, he refuses to sell it, claiming its unique sound and sentimental value make it priceless.Which scenario demonstrates the influence of the endowment effect on Max?
Answer
A
Max is influenced by his peers' valuation of his guitar, skewing the guitar’s worth.
B
Max asks for more than the market value due to his sentimental attachment to the guitar.
C
Max is setting a high initial selling price to give him an edge over negations during the sale.
D
Max believes the guitar's unique sound justifies a higher price, independent of market value.
Explanation
The endowment effect occurs when people value something more simply because they own it. Max’s sentimental attachment makes him unwilling to sell his guitar for a fair price, so he may ask more than its market value. Choice B captures this ownership-based increase in perceived value; choice D focuses on the guitar’s sound rather than the effect of owning it.
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