Question

You spent $500 last week fixing the transmission in your car. Now, the brakes are acting up, and you are trying to decide whether to fix them or trade the car in for a newer model. In analyzing the brake situation, the $500 you spent fixing the transmission is a(n) _____ cost.

Answer 1

Answer: Sunk cost

Step-by-step explanation:

Sunk cost also sometimes referred to as past cost is a cost that has already been spent by an individual or firm and cannot be recovered.

From the question, if $500 was spent last week in fixing the transmission in a car and the brakes are now acting up, and one has to decide qwhether to fix them or trade the car in for a newer model.

The amount spent on the brake situation in this case is a sunk cost as it has already been incurred and nothing can be done about it anymore.