People Consistently Consider Sunk Costs When Weighing the Trade-Offs Involved

question 85

Multiple Choice

People consistently consider sunk costs when weighing the trade-offs involved in a decision because:

• A) they are rational.
• B) they are utility-maximizers.
• C) they think at the margin.
• D) they find it hard to accept their losses.

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Definitions:

Perpetual Inventory System

Inventory accounting method where transactions are instantly recorded via computerized point-of-sale systems and enterprise asset management software.

Merchandise

Goods bought and sold by businesses in the course of their trade; often refers specifically to products sold by retail businesses.

Discount Period

The discount period is the time frame during which a payment can be made with a discount for early payment according to the terms of a sales agreement.

Operating Expenses

Costs associated with running a business’s core operations on a daily basis, such as rent, utilities, and payroll, excluding the cost of goods sold.