A Comprehensive Research Study Has Revealed That a Local Car

question 34

Multiple Choice

A comprehensive research study has revealed that a local car dealer offers the best prices on cars.Your best friend just told you that the car he purchased at the local dealer was overpriced.As a consequence,you decide to buy your car from an out-of-town dealer.This decision is an example of which of the following systematic mistakes that people make when making decisions?

• A)People are overconfident.
• B)People give too much weight to a small number of vivid observations.
• C)People are reluctant to change their minds.
• D)All of the above.

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Definitions:

Informational Cascade

An assessment (e.g., of an investment opportunity) based in part on the actions of others, which in turn were based on the actions of others.

Expected Gain

The anticipated positive return or benefit from an investment or action, often calculated as an average of possible outcomes.

Negative Return

A loss incurred from an investment where the total costs exceed the total revenues.

Social Impact

The effect of an activity on the social fabric of the community and well-being of individuals and families.