Tricia Has Lost Money on a Particular Stock for the Past

question 43

Multiple Choice

Tricia has lost money on a particular stock for the past three years. Thus, she believes the stock will have a high positive rate of return this year because earning a good return is long overdue. This assumption is best described as the:

• A)law of small numbers.
• B)house money effect.
• C)gambler's fallacy.
• D)false consensus.
• E)recency bias.

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Definitions:

Period Costs

Expenses that are not directly tied to the production process and are recorded as expense in the period they are incurred, such as selling, administrative, and general expenses.

Variable Cost

Charges that adjust seamlessly with the volume of manufacturing or services provided.

Manufacturing Overhead

The total of all overhead costs associated with the manufacturing process other than direct materials and direct labor. This includes costs such as maintenance, utilities, and equipment depreciation.

Direct Manufacturing Cost

Expenses directly tied to the production of goods, such as labor and materials, but excluding indirect costs like overhead.