Sadie Just Bought a New Karaoke Machine to Replace Her

question 66

Multiple Choice

Sadie just bought a new karaoke machine to replace her old one, which works perfectly fine and would sell on Craigslist for $50. The fact that Sadie would not pay $50 for the old karaoke machine, yet continues to let it sit in her closet unused, is explained by:

• A)the implicit cost of ownership bias.
• B)the cost of admitting she likes karaoke.
• C)ignored sunk costs.
• D)irrationally considering sunk costs.

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Definitions:

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life.

Equipment

Tangible property or assets, excluding real estate and vehicles, used in the operation of a business to produce goods or services.

Unearned Revenue

Money received by a company for goods or services yet to be delivered or provided, recorded as a liability.

Liability

An obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services, or other yielding of economic benefits in the future.