Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time.In less than a week she discovered that the shoes were uncomfortable.Grace went back to wearing her old pair and stashed away the new pair.When asked by her boss,Mme.Ramotswe,why she does not simply give away the new pair,she said: 'But I paid so much for them.' Grace's behaviour
A) is rational: she should not discard a valuable item.
B) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not.
C) supports the endowment effect which states that ownership of an item makes it more valuable.
D) is rational because the more you pay for an item the more valuable it is.

Question

Quizplus · Accepted Answer

Grace's behavior ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give away the uncomfortable shoes or not. The concept of sunk cost suggests that the money or resources that have been invested in a purchase should not be a factor in deciding whether to keep or discard an item.

Grace Makutsi Finally Bought a Pair of Blue Shoes That