Going skiing will cost Adam $80 a day.He also loses $40 per day in wages because he has to take time off from work.Adam still decides to go skiing.
A) His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.
B) The $80 price of skiing is a sunk cost and so did not affect Adam's decision.
C) He loses a total of $120 per day, so his decision is irrational.
D) Adam's lost $40 per day in wages is a sunk cost and so did not affect his decision.
E) Adam is definitely making a decision that is in the social interest.

Question

Quizplus · Accepted Answer

Adam's decision is rational if his marginal benefit from skiing is greater than the total cost of $120 (skiing cost + lost wages). As long as the satisfaction or enjoyment he gets from skiing outweighs the monetary cost, his decision is rational. The $80 price of skiing is a sunk cost and does not affect Adam's decision since it cannot be recovered. However, the lost wages of $40 is not a sunk cost because he could have earned it if he had not gone skiing.

Going Skiing Will Cost Adam $80 a Day