If Asked, "Which Is More Probable? A

question 197

Multiple Choice

If asked, "Which is more probable? A. Tiger Woods will not be in the lead after the first round of golf of a tournament but will win the tournament. B. Tiger Woods will not be in the lead after the first found of golf of a tournament." Most people would answer A, although A is less likely to be true than B. According to Tversky and Kahneman, such faulty conclusions are based on

• A) the framing effect.
• B) convergent thinking.
• C) divergent thinking.
• D) the representativeness heuristic.

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Definitions:

Absorption Costing

An accounting method that integrates all components of manufacturing expenses—materials, labor, and every overhead, be it variable or fixed—into the final product cost.

Variable Costing

An accounting approach where only variable production costs are assigned to inventory, distinguishing it from absorption costing by treating fixed overhead as a period cost.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or loss.

Variable Costing

An accounting method that only assigns variable costs to inventory, excluding fixed manufacturing overhead costs.