Which of the Following Statements Demonstrates an Understanding of the Importance

question 26

Multiple Choice

Which of the following statements demonstrates an understanding of the importance of sunk costs for decision making? I. "Even though I hate my MBA classes, I can't quit because I've spent so much money on tuition."
II) "To break into the market for soap our firm needs to spend $10M on creating an image that is unique to our new product. When deciding whether to develop the new soap, we need to take this marketing cost into account."

• A) I only
• B) II only
• C) Both I and II
• D) Neither I nor II

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Definitions:

Asset Account

A classification within financial accounting that reports the value of a company's long-term resources, such as property, equipment, and intellectual property.

Computer

An electronic device that executes specific tasks or calculations according to a set of instructions or software.

Utilized

Employed or made use of effectively.

Business

An organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers.