This behaviour economics problem

1. For each of the following ndings, carefully discuss (i) why it reects a statistical mistake; and (ii) how it can be explained by the representativeness heuristic. (8 points each) (a) Subjects were given the following information: \"A town is served by two hospitals. In the larger hospital, 45 babies are born each day. In the smaller hospital, 15 babies are born each day. On average, 50% of babies are boys, but the exact percentage varies from day to day. For a period of 1 year, each hospital recorded the days on which more than 60 percent of the babies born were boys. Which hospital do you think recorded more such days?\" 22 percent of the subjects thought it would be the smaller hospital, and the same number thought it would be the larger hospital. 56 percent thought the two hospitals recorded about the same number of such days (within 5% of each other). (b) Subjects were told to imagine the following scenario. An urn is lled with red and white balls, where one-third of the balls is one color and two-thirds is the other color. The probability that the urn has more red balls than white balls is one-half (and so is the probability that the urn has more white balls than red balls). One person has drawn 5 balls from the urn with replacement, and found that 4 were red and 1 was white. Another person has drawn 20 balls from the urn with replacement, and found that 12 were red and 8 were white. Subjects were then asked which person should be more condent that the urn has more red balls than white balls. Most subjects guessed the rst person, the one who has drawn ve balls. [In reality, the second person should be twice as condent. Which one can derive this using Bayes' rule. (but you wouldn't need to do that to get full credit)]