Tom Knows That the Title Insurance Company Made a Mistake

question 22

Multiple Choice

Tom knows that the title insurance company made a mistake on his property title. Because of their mistake, his neighbor now has access to an easement road through his back 25 acres. He can't use the acreage for pasture, because his neighbor insists that the gates remain open. The title company has offered a $40,000 settlement. Tom has decided to take the settlement rather than possibly lose in court if he were to sue the title company for more money. Tom's decision is based on ________.

• A) hindsight bias
• B) availability bias
• C) risk aversion
• D) randomness error
• E) escalation of commitment

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Definitions:

ATC Curve

A graph that shows the average total cost of producing different quantities of a good or service, calculated by dividing the total cost by the quantity produced.

Positive Economic Profit

The excess amount by which total revenue surpasses the total costs, including opportunity costs of production.

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information.

ATC

Average Total Cost, which is the total cost per unit of output produced, calculated by dividing the total cost by the quantity of output.