CAF-5 · Chapter 15 · Question 10 of 10
In the context of decision-making, what is a "sunk cost"?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A cost that has already been incurred as a result of past decisions and cannot be altered by future decisions.
Explanation
Sunk costs are historical costs that have already been paid or committed to. Because they cannot be changed by any current or future decision, they are always totally irrelevant in short-term decision-making scenarios.
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