When a Decision Maker Chooses the Option Leading to the Outcome

question 7

Multiple Choice

When a decision maker chooses the option leading to the outcome that he or she most prefers,he or she has made a _____ decision.

• A)irrational
• B)rational
• C)profit-maximizing
• D)loss-minimizing

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Definitions:

Sold

Refers to the completion of a transaction where goods or services are exchanged for payment.

Recording Depreciation

The process of allocating the cost of a tangible asset over its useful life to reflect its decrease in value over time.

Expense Recognition Principle

An accounting principle stating that expenses should be recorded in the period in which they contribute to revenue, not necessarily when the expense is paid.

Fully Depreciated

An asset has reached the end of its useful life, and its book value is reduced to salvage value or zero.