Fine-Dining Restaurants Commonly Provide Statements in Their Menus Such As

question 62

Multiple Choice

Fine-dining restaurants commonly provide statements in their menus such as, "A 20% gratuity will be added to all checks for parties of six or more patrons." Given that this statement tends to raise the level of tips or gratuities left by other groups of diners, the statement is a good example of:

• A) the endowment effect.
• B) loss aversion.
• C) anchoring.
• D) none of the above

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Definitions:

Negative NPV

A condition where the net present value of all cash flows associated with a project or investment is negative, indicating that it is not financially viable.

Payback Period

The length of time it takes to recover the cost of an investment.

PI

A mathematical constant represented by the symbol π, approximated as 3.14159, or the ratio of a circle's circumference to its diameter in mathematics. Alternatively, if referring to "present indifference" or a concept specific to an industry or study, clarification is needed.

Positive NPV

An indicator that an investment's present value of net cash flows will exceed its initial cost, suggesting profitability.