When Decision Makers Choose to Continue an Existing Course of Action

question 121

Multiple Choice

When decision makers choose to continue an existing course of action because it is the less painful option at the time, this is known as:

• A)prospect theory effect.
• B)sunk costs effect.
• C)self-justification effect.
• D)self-enhancement effect.
• E)satisficing.

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Definitions:

Marginal Revenue

The increase in earnings resulting from the sale of one extra good or service.

Economic Profit

the difference between total revenue and total opportunity costs; a measure of profit beyond the normal return on investment.

Marginal Cost

The addition to total cost from producing one additional unit of a product.

Perfectly Competitive Firm

A perfectly competitive firm operates in a market where there are many buyers and sellers, the product is homogenous, and there is free entry and exit from the market.