Some Online Penny Auctions Charge a Fee, Such as $1

question 237

Essay

Some online penny auctions charge a fee, such as $1, for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

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Definitions:

Sales Tax

A tax imposed by a government on the sale of goods and services, typically calculated as a percentage of the selling price.

List Price

The manufacturer's suggested retail price (MSRP) of a product before any discounts, allowances, or rebates are applied.

Perpetual Inventory Records

A system of inventory management where updates are made continuously to reflect sales and purchases, ensuring real-time accuracy in inventory counts.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including both material and labor costs.