We Are Often Prone to Make Judgments on the Extent

question 38

Multiple Choice

We are often prone to make judgments on the extent to which the things we observe match our expectations of what we think things should be like while ignoring the mathematical probabilities of their occurrence. This error is known as the

• A)availability heuristic
• B)representativeness heuristic
• C)confirmation bias
• D)stereotypic bias

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Definitions:

Long-Run Equilibrium

A state in an economy or market where, given the long-term flexibility of prices and adjustment of all input factors, supply equals demand and all firms earn normal profits.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded by consumers, typically downward sloping.

Average Total Cost

The total cost of production divided by the total output, representing the cost per unit of output.

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, leading to competition based on product differentiation.