Standard Economic Theory Asserts That Sunk Costs Are Irrelevant in Making

question 181

Multiple Choice

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioural economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

• A)People measure the value of a good in terms of its purchase price.
• B)Even though sunk costs cannot be recovered, it has been incurred and therefore should be treated as part of the product's value.
• C)If consumers maximise their utility, it makes sense to consider the full purchase price of a product in their consumption decisions.
• D)Sunk costs have a higher opportunity cost than costs that can be recovered.

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Definitions:

Negative Behaviors

Actions or patterns of action that are harmful or undesirable in a social context, often leading to negative consequences.

Interrupting

The action of stopping or hindering a process or conversation by intervening or speaking over someone.

Stimulant

A compound that increases physiological or nervous system activity within the organism.

Major Depressive Disorder

A mental health condition characterized by persistent feelings of sadness, loss of interest in activities, and various emotional and physical problems.