Sunk costs will not affect any aspect of decision making by a competitive firm in the short run.

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. Since they cannot be changed or refunded, they are not relevant for decision making in the short run. A competitive firm will only consider the costs and benefits that can be changed in the short run, such as variable costs and revenue. Therefore, sunk costs will not affect any aspect of decision making by a competitive firm in the short run. Sunk costs are costs that have already been incurred and cannot be recovered, so they should not influence a firm's decisions in the short run. Instead, the firm should focus on the costs and benefits of the current decision at hand.

Sunk Costs Will Not Affect Any Aspect of Decision Making