Jim,a student at Southern Province University,is enrolled in 15 credit hours this semester.He is passing Calculus,but just barely,so he is considering withdrawing from the course.He tells a friend,"I would drop the course but I don't want to waste the $500 I paid in tuition." His friend replies,"The $500 tuition you paid for the course is irrelevant to your decision.Your grade in the course is the only thing that is important now." The friend is
A) incorrect,because the tuition will have to be paid again when Jim retakes the course.
B) correct,because the tuition is an average cost and average costs should never be considered when making decisions.
C) incorrect,because the tuition is a marginal cost and marginal costs should always be considered when making decisions.
D) correct,because the tuition is a sunk cost and sunk costs should not be considered when making decisions.
E) incorrect,and obviously so rich that money means nothing to him/her.

Question

Quizplus · Accepted Answer

The friend is correct because the $500 tuition is a sunk cost, meaning it has already been paid and cannot be recovered. The decision to drop the course should only be based on the potential costs and benefits going forward, not the money already spent.

Jim,a Student at Southern Province University,is Enrolled in 15 Credit