Standard Economic Theory Asserts That Sunk Costs Are Irrelevant in Making

question 240

Multiple Choice

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral 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 maximize 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.

---

Definitions:

Reader's Interest

The level of curiosity or concern shown by the audience towards the content or subject matter being presented.

Prospecting Letter

A letter intended for potential clients or partners, aiming to introduce the sender's business and propose a professional relationship.

Cover Letter

A document sent with a job application explaining the applicant's credentials and interest in the open position.

Specific Person

Refers to targeting or referring to an individual rather than a group or undefined entity.