The Study of Behavioral Economics Shows That Decision Makers

question 31

Multiple Choice

The study of behavioral economics shows that decision makers:

• A) are not limited by cognitive constraints.
• B) are incapable of learning from their mistakes.
• C) are prone to biases, mistakes, and pitfalls.
• D) are guided solely by monetary incentives.
• E) make decisions in a highly calculative and rational manner.

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Definitions:

150%-Declining-Balance

A method of accelerated depreciation, applying 150% of the straight-line rate to the declining balance of an asset, used to allocate larger depreciation expenses in the earlier years of an asset’s life.

Residual Value

The estimated value of an asset at the end of its useful life, often considered in leasing agreements and depreciation calculations.

Sum-Of-The-Years'-Digits Method

An accelerated depreciation method that computes annual depreciation by multiplying the depreciable cost of an asset by a series of fractions based on the sum of the asset's useful life digits.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was acquired, representing the reduction in value over time.