Which of the following best describes Gordon's 'bird in the hand' fallacy in the context of positive and normative analysis?

• A. It refers to the assumption that all economic agents act irrationally when making decisions.
• B. It is the idea that government intervention always leads to more efficient outcomes than market solutions.
• C. It describes the tendency to ignore sunk costs when evaluating economic choices.
• D. It is the mistaken belief that immediate, tangible benefits should always be preferred over potentially greater future gains, regardless of opportunity cost.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the context of Gordon's 'bird in the hand' fallacy, which relates to decision-making in economics, particularly how people value immediate benefits versus future gains.
2. Step 2: Recognize that this fallacy involves a normative judgment—how people think decisions should be made—rather than a positive statement about actual behavior.
3. Step 3: Identify that the fallacy is the mistaken belief that immediate, certain benefits (the 'bird in the hand') are always better than uncertain or delayed benefits (the 'two in the bush'), without properly considering opportunity costs or potential future gains.
4. Step 4: Compare this to other options: it is not about irrationality of agents, government intervention efficiency, or ignoring sunk costs, but specifically about the preference for immediate rewards over potentially larger future rewards.
5. Step 5: Conclude that the best description of the fallacy is the belief that immediate, tangible benefits should always be preferred over potentially greater future gains, regardless of opportunity cost.