You spent $500 last week ﬁxing the transmission in your car. Now, the brakes are acting up and you are trying to decide whether to ﬁx them or trade the car in for a newer model. In analyzing the
Brake situation, the $500 you spent ﬁxing the transmission is a(n) _____ cost.

Question

Quizplus · Accepted Answer

The $500 spent on fixing the transmission is a sunk cost, meaning it is a cost that has already been incurred and cannot be recovered. It is not relevant to the current decision of whether to fix the brakes or trade in the car. Therefore, it should not be factored into the decision-making process.

You Spent $500 Last Week ﬁXing the Transmission in Your