Sunk Costs Should Be Ignored in Decision Making Because They

question 54

Multiple Choice

Sunk costs should be ignored in decision making because they

• A)increase the cost of the transaction
• B)lead to an increase in the opportunity cost of any decision
• C)have already been paid
• D)often exceed marginal and average costs
• E)are usually negligible when compared with the explicit costs of decisions

---

Definitions:

Maximin Criterion

A decision rule used in statistics, economics, and game theory that selects the action which has the highest minimum payoff.

States of Nature

Possible outcomes or situations in decision-making under uncertainty that affect the results of different decisions but are beyond the control of the decision-maker.

Manufacturing Alternatives

Different methods or approaches available for the production of goods, considering factors like cost, technology, and resource availability.

Decision Tables

A tabular method for representing and analyzing logical relationships among variables and their possible outcomes.