In Economics, We Assume Rational Decisions Are Made When Individuals

question 43

Multiple Choice

In economics, we assume rational decisions are made when individuals weigh the:

• A)sunk costs versus the benefits of an action.
• B)sunk costs versus the opportunity costs of an action.
• C)opportunity costs versus the benefits of an action.
• D)opportunity and sunk costs versus the benefits of an action.

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Definitions:

Straight-Line

A depreciation method that allocates an equal amount of the depreciable cost of an asset to each accounting period of its useful life.

Annual Rate of Return

The percentage of profit or loss made from an investment in a year, taking into account both capital gains and interest or dividends received.

Operating Expenses

Expenses incurred in the process of earning sales revenue.

Incremental Effect

The impact of a particular decision on a company's finances, considering only the changes that directly result from the decision.