What Credit Decision Is Appropriate for a Potential Customer That

question 107

Multiple Choice

What credit decision is appropriate for a potential customer that offers an 80% chance of paying on a $10,000 (present value) sale that has an 80% (present value) cost?

• A) Grant credit since expected profit is $3,200.
• B) Grant credit since expected profit is $800.
• C) Refuse credit since expected profit is zero.
• D) Refuse credit since expected loss is $3,000.

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Definitions:

Drive Reduction

A theory in psychology suggesting that motivation arises from the need to reduce internal drives such as hunger or thirst, leading to certain behaviors.

Behavior-Reinforcer Belief

The belief or expectancy that a particular behavior will lead to a specific reinforcing consequence.

Expectations

Beliefs or anticipations about the future, which can influence people's behavior and decision-making processes.

Means-End-Readiness

A cognitive strategy where individuals identify and utilize the necessary means to achieve a desired end or goal.