Cindy has pumped over 850000 into a small business that has

Cindy has pumped over $850,000 into a small business that has consistently lost money ever year it has been open. She reasons that she has to continue investing time and money in her business because she\'s \"already put so much into it\" (instead of selling the business and cutting her losses).Cindy\'s reasoning illustrates: the conjunction fallacy. the sunk-cost fallacy. the law of demand. framing effects.

Solution

Answer is D. That is Framing Effect.

The framing effect is an example of cognitive bias, in which people react to a particular choice in different ways depending on how it is presented; e.g. as a loss or as a gain. People tend to avoid risk when a positive frame is presented but seek risks when a negative frame is presented. Gain and loss are defined in the scenario as descriptions of outcomes (e.g. lives lost or saved, disease patients treated and not treated, lives saved and lost during accidents, etc.)