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 be considered when making a decision about future actions. Ignoring sunk costs allows the decision maker to focus on relevant costs and benefits that can still be affected by the decision at hand. Option A and D are incorrect because including or subtracting sunk costs from costs and benefits respectively will not provide an accurate reflection of the potential impact of the decision. Option B is not the best choice as it indicates that sunk costs should be considered as part of the decision-making process.

A Decision Maker Can Always Make the Best Choice by