Cindy Just Graduated from University and Started Working at a Large

question 24

Multiple Choice

Cindy just graduated from university and started working at a large accounting firm.Although the firm will match her contributions to a retirement account,Cindy wants to wait several years before participating since there are so many things she needs to buy right now.What type of behaviour does this represent?

• A) unrealistic expectations about the future
• B) loss aversion
• C) mental accounting
• D) risk aversion

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Definitions:

Utility Function

An economic model that maps an individual's preference rankings for various bundles of goods onto a set of numerical values.

Price

The financial value anticipated, necessitated, or offered in return for a service or good.

Income

Money received on a regular basis from work, property, business, investment, or welfare.

Utility Function

A tool used in economics to represent a consumer's preference structure across different bundles of goods.