Question

Assume you are considering visiting your grandmother for a month this summer. In deciding whether to drive or fly, the ________ is a sunk cost and should be ignored.

1) Time it takes to drive
2) Cost of flying
3) Distance to your grandmother's house
4) Weather conditions

Answer 1

In deciding whether to drive or fly, the time it takes to drive is a sunk cost and should be ignored.

Step-by-step explanation:

Sunk costs are costs that have already been incurred and cannot be recovered. In deciding whether to drive or fly to visit your grandmother, the sunk cost is the time it takes to drive. This means that the time spent driving should be ignored when making the decision.

For example, if it takes 10 hours to drive to your grandmother's house, but only 2 hours to fly, the fact that you've already spent 10 hours driving should not influence your decision. Instead, you should focus on the current and future options, such as the marginal costs and benefits of driving versus flying.