A decision maker can always make the best choice by:
A) including sunk costs as part of marginal costs.
B) including sunk costs as part of total costs.
C) ignoring sunk costs.
D) subtracting sunk costs from total benefits.

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. Therefore, they should not affect future decisions. Ignoring sunk costs allows the decision maker to focus on the relevant costs and benefits at hand, and make the best choice based on those factors. Including sunk costs as part of marginal or total costs can lead to a skewed analysis and potentially incorrect decisions. Subtracting sunk costs from total benefits is also not a relevant approach as it does not address the actual costs involved in the decision.

A Decision Maker Can Always Make the Best Choice By