You spent $500 last week fixing the transmission in your car.Now,the brakes are acting up,and you are trying to decide whether to fix them or trade the car in for a newer model.In analyzing the brake situation,the $500 you spent fixing the transmission is a(n)________ cost.

Question

Quizplus · Accepted Answer

The $500 spent on fixing the transmission is a sunk cost, meaning it is a cost that has already been incurred and cannot be recovered. It should not be factored into the decision to fix or trade in the car for a newer model. The relevant cost in this scenario would be the cost of fixing the brakes versus the cost of trading in the car and purchasing a new one.

You Spent $500 Last Week Fixing the Transmission in Your