Molly Sharp is producing a documentary about the plight of the six-toed ferrets of Sri Lanka.Molly has spent $125,000 of her own money on this project and the documentary is now complete.Molly just found out that no studio is willing to release her documentary and she must now shop it to cable television networks, where she knows she will not be able to recoup her investment.Which of the following statements regarding Molly Sharp's documentary is true?
A)She should not try to have her documentary aired on television because she cannot recoup her $125,000 investment.
B)Since the $125,000 is a sunk cost, she should still try to have her documentary aired on television even though she will not see a profit.
C)The $125,000 is a variable cost, so will not be incurred if she chooses not to have her documentary aired.
D)The $125,000 investment is an economic cost, and she will still make an accounting profit even if the television network willing to air her documentary pays her less than $125,000.

Question

Quizplus · Accepted Answer

Since the $125,000 is a sunk cost, Molly should still try to have her documentary aired on television even though she will not see a profit. Sunk costs are costs that have already been incurred and cannot be recovered. Molly cannot undo the money she has already spent on the documentary. Therefore, she should focus on trying to recoup whatever she can by having it aired on cable television networks.

Molly Sharp Is Producing a Documentary About the Plight of the Six-Toed