Sunk costs should be ignored in decision making because they
A)increase the cost of the transaction
B)lead to an increase in the opportunity cost of any decision
C)have already been paid
D)often exceed marginal and average costs
E)are usually negligible when compared with the explicit costs of decisions

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. Therefore, they should be irrelevant in decision making because they cannot be changed or avoided. Ignoring sunk costs allows decision makers to focus on the future costs and benefits that can be modified by the decision.

Sunk Costs Should Be Ignored in Decision Making Because They