A movie costs you and your friend $15 each.After one hour of watching the movie,you have struggled to stay awake while your friend has been on Facebook and is also bored with the movie.You suggest that you and your friend leave the movie and go to the park.Your friend responds by stating that he is not going to waste his $15 that was previously spent on the movie.Your friend is considering:

Question

Quizplus · Accepted Answer

Your friend is considering the sunk cost, which is the cost already incurred and cannot be recovered, since the money spent on the movie cannot be refunded or used for any other purpose. However, staying at the movie and being bored would not increase the marginal benefit, which is the additional benefit received from consuming one more unit or spending one more dollar. Therefore, the best choice would be to leave the movie and go to the park, even if it means losing the sunk cost, because the alternative provides a higher marginal benefit of enjoying the park instead of being bored at the movie.

A Movie Costs You and Your Friend $15 Each