What Is the Endowment Effect

question 302

Multiple Choice

What is the endowment effect?

• A)the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than what they would be willing to pay to buy the good if they did not already own it
• B)the tendency of people to be unwilling to sell something they already own because of its sentimental value
• C)the tendency of people to overstate the value of a good they already own even though similar items can be purchased at a lower price
• D)the sum total of assets that a person has acquired over the years

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Definitions:

Maximize Profits

The objective of most private firms to increase their bottom line to the highest possible level given their resources and market conditions.

Natural Monopolies

A market condition where due to high infrastructure costs or significant barriers to entry, a single company can supply a product or service more efficiently than multiple competing firms.

Government Regulation

The establishment of rules and laws by government bodies that are intended to control or govern conduct and practices within various sectors.