What are sunk costs?
Understand the Problem
The question is attempting to inquire about the concept of sunk costs, which refers to costs that have already been incurred and cannot be recovered. The user may be looking for an explanation or examples related to sunk costs.
Answer
An incurred expense that cannot be recovered.
A sunk cost is an expense that has already been incurred and cannot be recovered, and should not influence future decisions.
Answer for screen readers
A sunk cost is an expense that has already been incurred and cannot be recovered, and should not influence future decisions.
More Information
Sunk costs are often associated with the 'sunk cost fallacy', a cognitive bias where individuals continue an endeavor because of previously invested resources (time, money, or effort), even when continuation is not the best decision.
Tips
Common mistakes include allowing sunk costs to influence future business decisions, which can lead to additional losses. Decisions should be made based on potential future outcomes rather than past expenditures.
Sources
- What Is a Sunk Cost—and the Sunk Cost Fallacy? - Investopedia - investopedia.com
- Sunk cost - Wikipedia - en.wikipedia.org
- What is a Sunk Cost? | Definition and Overview - ProductPlan - productplan.com
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