The Following Statements About the "Sunk Cost Fallacy" Are True

question 348

Multiple Choice

The following statements about the "sunk cost fallacy" are true, except

• A)it's the tendency to drag past costs into current marginal cost-benefit calculations.
• B)it comes from a desire to "get one's money's worth" out of a past expenditure.
• C)it refers to the fact that average fixed costs are not a major part of production costs.
• D)it could lead one to "throw good money after bad."

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Definitions:

Effective Interest Rate

The true cost of borrowing that includes all fees and compounding of interest, expressed as an annual rate.

Fair Value

An approximation of the cost at which a liability or asset might be traded between informed, consenting parties in a fair transaction.

AASB 16

The Australian Accounting Standards Board standard concerning leases, requiring lessees to recognize assets and liabilities for most leases.

IFRS 16

An International Financial Reporting Standard that specifies how an organization should report leases in its financial statements.