Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of:
A)inconsistent reasoning; saving $20 is saving $20.
B)the proper application of the Cost-Benefit Principle.
C)rational choice because saving 40 percent is better than saving 4 percent.
D)inconsistent reasoning because prices are sunk costs.

Question

Quizplus · Accepted Answer

In applying the Cost-Benefit Principle, it is a common decision pitfall to consider proportions rather than the amount saved.

Tony Notes That an Electronics Store Is Offering a Flat