Question

Many entrepreneurs who started dot.com businesses in the early 2000s spent enormous

amounts of personal time and money to launch their new businesses. Many of them tried to get
private investors to invest in their ideas and businesses. They were often unsuccessful and they lost
all of their money. Microeconomic theory classifies this failure as what?

A. A Securitization Failure
B. A Sunk Cost Failure
C. A Layered Risk Failure
D. All of the above

Answer 1

The failure of entrepreneurs who started dot.com businesses in the early 2000s, spending personal time and money and unsuccessfully seeking private investors, is classified as a Sunk Cost Failure. The option (B) is correct.

Step-by-step explanation:

The failure of many entrepreneurs who started dot.com businesses in the early 2000s, spending personal time and money to launch their new businesses, and unsuccessfully seeking private investors, is classified as a Sunk Cost Failure in microeconomic theory.

A sunk cost is a cost that has already been incurred and cannot be recovered, and in this case, it refers to the personal time and money invested by the entrepreneurs. Despite their efforts, the businesses failed, resulting in the loss of the entrepreneurs' money. Therefore, option (B) is correct.