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Question 22 • FL-2102373-Personal Finance and Money Management Honors

Which scenario best describes the endowment effect?

Answer

Marek throws out a functional desk to buy a new one that matches his room's decor.

Carlos prices his collection of comic books above market value because of the joy they bring him.

Anisa donates her old toys to charity, feeling good about the decision to declutter and help others.

Bella keeps her grandmother's watch, even though it's worth much less than the current smartwatches.

Explanation

The endowment effect is the tendency to value something more highly simply because you own it. Carlos prices his comic books above their market value because he personally enjoys them, which best fits this effect. Bella may keep the watch because of its sentimental connection to her grandmother, which is a different reason for valuing an item.

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