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    Question

    Select the statement that can logically complete the

    paragraph given below. Ā Ā That human beings often continue to pour money into bad projects because they have already invested in them and cannot bring themselves to lose that investment is well known. Indeed, the Sunk 3ost Fallacy, as this phenomenon is called, is frequently cited as an example of people failing to behave in the ā€œrationalā€ way that classical economics suggests they should. Though the exact psychological underpinning of the sunk-cost fallacy is debated, it might reasonably be expected to apply only when the person displaying it also made the original investment. _________________________. In making decisions, people may also take into account the sunk costs of others.
    A However, a study published recently suggests this is not true. Correct Answer Incorrect Answer
    B It is even more strongly applicable if the time frame is long term in nature. Correct Answer Incorrect Answer
    C 1 possible explanation for the same is that social signalling is involved in such cases. Correct Answer Incorrect Answer
    D The sunk-cost phenomenon shapes human behaviour much more broadly than was previously thought. Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    The paragraph explores the sunk-cost fallacy and its usual applicability when the decision-maker has made the original investment. The blank introduces a contrasting idea, suggesting that this assumption is incorrect. Option 1 fits perfectly as it introduces a study that challenges the conventional understanding of the fallacy, creating a logical flow from the paragraph to the new insight. Option 2 discusses long-term applicability, but the paragraph seeks to contrast, not Option 3 proposes a possible explanation but fails to logically follow the blank that demands a contrast. Option 4 overgeneralises the phenomenon without providing the necessary contrasting evidence.

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