20.3.2 - Sunk Cost
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Practice Questions
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Define sunk cost.
💡 Hint: Think about costs related to past expenses that you cannot get back.
Give an example of a sunk cost.
💡 Hint: Consider expenses that cannot be refunded.
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Interactive Quizzes
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What are sunk costs?
💡 Hint: Think about expenses that can't be refunded.
True or False: Sunk costs should influence current decision-making.
💡 Hint: Focus on what's recoverable for future choices.
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Challenge Problems
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You have invested $15,000 in a startup that is losing money each month. Assess the importance of recognizing the sunk cost in deciding whether to continue investing or shut down the startup.
💡 Hint: Focus on the startup's future earning potential rather than the past loss.
A company decides to continue production of a popular product even though market trends show a decline in demand. They reference the heavy advertising costs already incurred. Analyze the decision considering sunk costs.
💡 Hint: Consider potential future income instead of past investment.
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