Which of These Is an Example of Rational Inattention

question 38

Multiple Choice

Which of these is an example of rational inattention?

• A)submitting a paper with a few typos,knowing that they won't affect the grade
• B)sleeping in later than you had intended
• C)a firm delaying price changes to avoid losing customers
• D)a firm being unsure of its competitors' prices
• E)a firm changing prices so often its customers stop noticing

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Definitions:

Profitability Index (PI)

A calculation that relates the benefits of an investment project to its costs, often used to compare the attractiveness of different projects.

Discount Rate

The rate at which an individual discounts future cash flows to determine their present value, essential in capital budgeting to assess the profitability of investments.

Capital Budgeting

The procedure a company follows to assess possible significant projects or investments.

Positive Wealth

A situation where the total value of all owned assets exceeds any liabilities, leading to a net positive financial position.