QuestionJuly 17, 2025

People often overvalue the present relative to the future because: they must give up money today and the future appears very distant. they are rational about the decision for the current well-being. they are willing to give up the costs in the future for today's benefits. their assets can increase in value over time.

People often overvalue the present relative to the future because: they must give up money today and the future appears very distant. they are rational about the decision for the current well-being. they are willing to give up the costs in the future for today's benefits. their assets can increase in value over time.
People often overvalue the present relative to the future because: they must give up money today and the future appears very distant. they are rational about the decision for the current well-being. they are willing to give up the costs in the future for today's benefits. their assets can increase in value over time.

Solution
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Answer

The correct answer is: "they are willing to give up the costs in the future for today's benefits." Explanation 1. People often prioritize immediate rewards over future benefits due to the perception that future outcomes are less certain or distant, leading to a tendency to overvalue present consumption. 2. Let's evaluate each option based on the concept of present bias and rational decision-making. - **Option 1**: "they must give up money today and the future appears very distant." - This aligns with the idea of present bias as it highlights the trade-off between current and future value. - **Option 2**: "they are rational about the decision for the current well-being." - While people may think they are being rational, this does not explain why they overvalue the present; rather, it suggests a misunderstanding of rationality in valuing time. - **Option 3**: "they are willing to give up the costs in the future for today's benefits." - This directly relates to present bias, emphasizing the preference for immediate gratification despite potential future costs. - **Option 4**: "their assets can increase in value over time." - This statement is more about investment growth than about present versus future valuation and does not address the core issue of present bias. 3. Based on the analysis, options 1 and 3 both relate closely to the reasons behind present bias. However, option 3 explicitly states the willingness to sacrifice future costs for immediate benefits, which captures the essence of the behavior described.

Explanation

1. < Understanding Present Bias ><br /> People often prioritize immediate rewards over future benefits due to the perception that future outcomes are less certain or distant, leading to a tendency to overvalue present consumption.<br /><br />2. < Analyzing Options ><br /> Let's evaluate each option based on the concept of present bias and rational decision-making. <br /><br />- **Option 1**: "they must give up money today and the future appears very distant." <br /> - This aligns with the idea of present bias as it highlights the trade-off between current and future value.<br /> <br />- **Option 2**: "they are rational about the decision for the current well-being."<br /> - While people may think they are being rational, this does not explain why they overvalue the present; rather, it suggests a misunderstanding of rationality in valuing time.<br /> <br />- **Option 3**: "they are willing to give up the costs in the future for today's benefits."<br /> - This directly relates to present bias, emphasizing the preference for immediate gratification despite potential future costs.<br /> <br />- **Option 4**: "their assets can increase in value over time."<br /> - This statement is more about investment growth than about present versus future valuation and does not address the core issue of present bias.<br /><br />3. < Selecting the Best Option ><br /> Based on the analysis, options 1 and 3 both relate closely to the reasons behind present bias. However, option 3 explicitly states the willingness to sacrifice future costs for immediate benefits, which captures the essence of the behavior described.
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