Rick Finds a Great Internet Deal on an All-Inclusive Vacation

question 65

Multiple Choice

Rick finds a great Internet deal on an all-inclusive vacation rental in the Tropics for $1200,and immediately places a $1000 nonrefundable deposit on it.He later learns that the dates he planned to go are right in the middle of hurricane season,and it is likely to be miserable and potentially dangerous weather the entire time.Rick decides he cannot waste the $1000 and takes the trip anyway.While sitting in the rain,miserable,Rick realizes:

• A) he fell victim to the sunk-cost fallacy and should have ignored the fact that the $1000 was gone.
• B) he fell victim to the implicit-cost fallacy and should have ignored the fact that the $1000 was gone.
• C) he fell victim to the fungibility-fallacy and should not have gone on the trip.
• D) going on the trip was a utility-minimizing experience.

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Definitions:

Cost of Goods Sold

Costs directly related to creating products that a company offers for sale.

Net Income

The amount of earnings left over after all expenses have been deducted from revenue, indicating the financial profitability of a business.

Gross Profit Method

A technique to estimate the inventory's value by deducting the cost of goods sold from the total sales revenue.