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:

Efficient-market Hypothesis

The theory that all known information is already reflected in stock prices, making it impossible to consistently achieve higher returns than the overall market.

Security Prices

The current cost or value at which a particular security, such as stocks, bonds, or options, can be bought or sold in the market.

Empirical Validity

The extent to which a theoretical concept is supported by real-world evidence or data.

Information Processing

The acquisition, recording, organization, retrieval, display, and dissemination of information.