When Sebastian Wrote the Contract with BP for Over Two

question 14

Multiple Choice

When Sebastian wrote the contract with BP for over two billion dollars, he included targets for performance that had to be met before a payment would be released. Sebastian was trying to avoid ________bias.

• A) overconfidence
• B) hindsight
• C) framing
• D) escalation of commitment
• E) sunk-cost

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Definitions:

Inelastic Demand

Describes a situation in which the demand for a product does not significantly change with a change in price.

Total Expenditures

The sum of all spending or expenses incurred by an individual, organization, or government.

Close Substitutes

Products or services that can serve almost the same function as another in the eyes of consumers.

Price Increase

The rise in the cost of goods or services over time, which can be caused by factors such as inflation, increased production costs, or high demand.