Up Until Three Years Ago,A

question 26

Multiple Choice

Up until three years ago,A.C.Dime opened an average of ten new retail stores a year.One of those stores had to be closed within two years due to poor sales.This 90 percent success ratio was fairly steady for over 30 years.Starting three years ago,the firm has opened 40 new stores and every one had significant profits within 6 months.Management believes their recent success is not just a random event and that all future stores will be profitable.Thus,the managers have decided to open a minimum of 15 new stores each year.The managers are suffering from:

• A) arbitrage limitations.
• B) anchoring and adjustment.
• C) aversion to ambiguity.
• D) the clustering illusion.
• E) myopic aversion.

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Definitions:

Willingness To Pay

The maximum price a consumer is prepared to pay for a good.

Positively Sloped

Describes a graph or relationship where, as one variable increases, the other variable also increases, typical of a supply curve in economics.

Negatively Sloped

A graphical representation showing a decrease in one variable as another variable increases, often used in the context of demand curves.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total net benefit to society from the production and consumption of goods and services.