Prospect Theory and Sunk Costs Effect Are Two Reasons Why

question 4

Multiple Choice

Prospect theory and sunk costs effect are two reasons why people

• A)engage in escalation of commitment.
• B)make nonprogrammed decisions rather than programmed decisions.
• C)encourage employee involvement.
• D)engage in satisficing.
• E)define problems in terms of preferred solutions.

---

Definitions:

Marginal Revenue

The extra revenue gained by selling an additional unit of a product or service.

Total Cost

The sum of all expenses incurred in the production of goods or services, including fixed and variable costs.

Profit Maximizing Price

The price level at which a business can achieve the highest profit possible, based on its production costs and demand for its products.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded.