Describe at Least Three of the Cognitive Biases That Individual

question 27

Essay

Describe at least three of the cognitive biases that individual decision makers experience.Then describe a real or hypothetical situation for each of the three biases, explaining how the bias is evident in the situation.

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Definitions:

Variable Factor

In economics, an input in the production process that can be adjusted in the short run to change the quantity of output.

Fixed Factors

Inputs in the production process that cannot be easily increased or decreased in a short period of time.

Constant Returns To Scale

a situation in production where increasing all inputs by the same percentage results in output increasing by that same percentage.

Long-run Profits

The potential earnings of a business over a period long enough for all inputs to be adjusted, considering the firm's ability to enter or exit markets.