What is a sunk cost?
A)A cost that can be avoided if certain choices are made
B)A cost that always varies with the output of a factory
C)The average cost of operating a plant
D)The "lower envelope" of short-run average cost functions
E)A cost incurred no matter what the decision is and cannot be avoided

Question

Quizplus · Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered regardless of the decision made. It should be ignored in decision-making because it is irrelevant to future costs and benefits. Therefore, the best choice is E which correctly describes a sunk cost.

What Is a Sunk Cost