Final answer:
The correct answer is C. The cost of renting a movie at your condo is a differential cost, which refers to the cost difference between two alternatives. It's important to consider this cost when making a decision rather than a sunk cost, which is already incurred and should not affect future decisions.
Step-by-step explanation:
The cost of renting a movie at your condo in the given scenario is a differential cost. A differential cost refers to the difference in cost between two decision alternatives. In this case, the differential cost is between the cost of renting a movie to watch at the condo versus the cost of watching a movie at the theater, excluding the cost of Mexican food, as this will occur after the movie under either scenario and does not affect the decision about the movie itself.
By contrast, a sunk cost is one that has already been incurred and cannot be recovered, which does not affect future decisions. Let's relate this to the case of Selena, who has spent $8 on a movie ticket only to find the movie terrible after 30 minutes. Should she continue watching or leave? The money spent on the ticket is a sunk cost. It's already spent and non-refundable, hence it should not influence her decision. What matters are the marginal costs and benefits going forward, not those in the past.