The Economic Rule of Thumb That Only Future Costs and Benefits

question 40

Multiple Choice

The economic rule of thumb that only future costs and benefits, not past commitments, should be considered in making a decision is the

• A) sunk cost principle.
• B) escalation effect.
• C) endowment effect.
• D) contingency model.

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Definitions:

Bond

A fixed income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental.

Sell

The act of giving or handing over something in exchange for money or other compensation.

Premium

An amount paid regularly to insure something or to cover the cost of a policy, also used to describe the amount paid over the nominal value of something.

Bonds

Long-term debt securities issued by corporations and government entities that pay interest to the holder.