Which of the Following Best Illustrates the Fallacy of Composition

question 65

Multiple Choice

Which of the following best illustrates the fallacy of composition?

• A)​If the price of a product rises, the quantity supplied will decline.
• B)​The average wage rate tends to increase at approximately the same rate as inflation; hence, wage increases must cause inflation.
• C)​Resources are scarce; therefore, there is no such thing as a free lunch.
• D)​If I talk loudly at a party, I have a better chance of being heard by my listeners.If everyone at the party talks loudly, everyone can be heard more clearly.

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Definitions:

Dividends Per Common Share

The amount of a company's profit distributed to each outstanding share of common stock.

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, often used to assess if a stock is over or under-valued.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues, indicating the financial performance over a specific time period.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time.