What Is the Endowment Effect

question 107

Multiple Choice

What is the endowment effect?

• A) The phenomenon that economic agents are endowed with different qualities and abilities so that trade among individuals increases efficiency.
• B) The tendency for economic agents with abundant resources to consume a proportionately greater quantity of goods and services.
• C) The tendency for people to be unwilling to sell something they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it.
• D) The tendency of firms to use celebrities endowed with good looks to promote their products.

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Definitions:

Current Ratio

An indicator of a business's capability to cover its obligations due in less than a year, determined by dividing the total of current assets by the total of current liabilities.

Marketable Securities

Financial instruments that can be easily converted to cash, such as stocks or bonds.

Horizontal Analysis

A method of financial examination that involves comparing past financial information across different time frames to detect trends and patterns of growth.

Accounts Receivable

Funds that clients or customers owe to a company for products or services that have been provided but not yet compensated.