Why Is a Sunk Cost Not Part of the Opportunity

question 47

Multiple Choice

Why is a sunk cost not part of the opportunity cost of a decision?

• A) Because the expense would too often outweigh the benefits.
• B) Because the chances of recouping it are infinitesimally small.
• C) Because the money is gone, regardless of the decision made.
• D) Sunk costs are a part of the opportunity cost of a decision.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not affect future business decisions.

Alternatives

Different options or strategies available for achieving a goal or solving a problem, often considered during decision-making processes.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or business activity.

Monthly Rent

A regular payment made for the use of property or land on a monthly basis.