You are considering your housing options for next semester. The cost of a dorm room and the cost of an apartment are the same. You paid a $50 non-refundable deposit to live in the dorm last year. This deposit is an example of a(n):
A) opportunity cost.
B) relevant cost.
C) sunk cost.
D) avoidable cost.

Question

Quizplus · Accepted Answer

The deposit is a sunk cost, which means it cannot be recovered and should not be considered in the decision-making process. Therefore, the choice between a dorm room and an apartment should be based solely on current and future relevant costs, such as rent, utilities, and transportation.

You Are Considering Your Housing Options for Next Semester