Asked by
Madalyn Stonebraker
on Nov 07, 2024
Verified
Which one of the following is most likely a sunk cost?
A) the money you spent last week fixing your car's transmission
B) the market value of an idle machine which you have decided to use for a new project
C) the cost of a worker to operate an idle machine which you have decided to use for a new project
D) the cost of the health insurance which you must pay a worker that you plan to hire for a new project
E) the reduction in sales of an existing product caused by the introduction of a new product
Sunk Cost
A past expenditure that has already been incurred and cannot be recovered, which should not affect current or future financial decisions.
Market Value
The current price at which an asset or company can be bought or sold, determined by the supply and demand dynamics in the market.
- Elucidate and implement the principle of sunk costs in the process of decision-making.
Verified Answer
RC
Learning Objectives
- Elucidate and implement the principle of sunk costs in the process of decision-making.