The Fallacy of Composition

question 78

Multiple Choice

The fallacy of composition:

• A)is illustrated by the saying that if one moviegoer runs to an exit during a fire to get out of the building,then all the moviegoers should rush to that exit.
• B)is the error of attributing what applies to many to the case of one.
• C)is the same as interpreting association as causation.
• D)is illustrated by the assertion that the stock market rises when hemlines of current fashions rise.
• E)implies that not all variables are held constant.

---

Definitions:

Inventory Period

The time it takes for a company to turn its inventory into sales.

Accounts Payable Period

The duration it takes for a company to pay off its supplier invoices.

Accounts Receivable Period

The typical period a firm takes to collect receivables from its clients.

Cash Cycle

The period between the outlay of cash for raw materials and receiving cash from customer payments, essentially measuring the time it takes for a company to turn its inventory into cash.