Microeconomics 20th Edition by Campbell McConnell, Stanley Brue,Sean Flynn

Exercise 6

Suppose that Ike is loss averse. In the morning, Ike's stockbroker calls to tell him that he has gained $1,000 on his stock portfolio. In the evening, his accountant calls to tell him that he owes an extra $1,000 in taxes. At the end of the day, does Ike feel emotionally neutral since the dollar value of the gain in his stock portfolio exactly offsets the amount of extra taxes he has to pay Explain.