People Often Make Decisions on the Basis of Mental Accounting

question 34

Multiple Choice

People often make decisions on the basis of mental accounting. One facet of this accounting is making a decision based on the way a problem was posed. This is called ________.

• A) framing
• B) the sum-cost fallacy
• C) loss aversion
• D) positioning

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Definitions:

Gross Method

An accounting practice where purchases are recorded at their gross price without deducting any cash discounts.

Invoice Price

The price indicated on an invoice, representing the cost of goods or services purchased.

Periodic Inventory System

An inventory accounting system where updates to inventory levels are made at specific intervals, rather than continuously.

Cost of Goods Sold

The costs directly associated with producing a company's goods for sale, including expenses for labor and materials.