Standard Economic Theory Asserts That Sunk Costs Are Irrelevant in Making

question 240

Multiple Choice

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

• A)People measure the value of a good in terms of its purchase price.
• B)Even though sunk costs cannot be recovered, it has been incurred and therefore should be treated as part of the product's value.
• C)If consumers maximize their utility, it makes sense to consider the full purchase price of a product in their consumption decisions.
• D)Sunk costs have a higher opportunity cost than costs that can be recovered.

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Definitions:

North American Women

Female individuals living in or originating from North America, including aspects of their social, cultural, and political lives.

Foreign Assignments

Work placements in countries other than the employee's home country, usually for an extended period, as part of their employment.

Self-Disqualification

The act of removing oneself from consideration or competition due to perceived inadequacies or lack of confidence.

Geert Hofstede's Study

A comprehensive framework for understanding the cultural differences among countries, focusing on dimensions such as power distance, individualism vs collectivism, masculinity vs femininity, uncertainty avoidance, long-term orientation, and indulgence vs restraint.