You have just purchased a car for $20,000 and learned that you have failed the driving test.Your brother offered to purchase the car from you for $19,000 and you have accepted the offer.The $1,000 loss represents
A) the marginal cost of the car.
B) the sunk cost of a bad decision.
C) the average cost of the car.
D) the marginal benefit of getting rid of the car.
E) the benefit of the car.

Question

Quizplus · Accepted Answer

The $1,000 loss represents a sunk cost of a bad decision because the money has already been spent on purchasing the car and cannot be recovered. Accepting your brother's offer to purchase the car is a way to minimize your losses and move on from the bad decision.

You Have Just Purchased a Car for $20,000 and Learned