Which of the following is true of sunk costs?
A)It is a type of opportunity cost.
B)It is a type of implicit cost.
C)It should be ignored when making decisions.
D)It includes annual costs like payroll,insurance expenses,etc.

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered, therefore they should be ignored when making decisions because they are irrelevant to future choices. Option A is incorrect because opportunity costs are the benefits that are foregone due to a particular choice made. Option B is incorrect because implicit costs are the opportunity costs associated with the use of the firm's resources. Option D is incorrect because annual costs are generally not considered as sunk costs since they are recurring and can be avoided in the future.

Which of the Following Is True of Sunk Costs