Question

Van has plans to go to an opera and already has a $100 nonrefundable, nonexchangeable, and nontransferable ticket. Now Amy, whom Van has wanted to date for a long time, asks him to a party. Van would prefer to go to the party with Amy and forgo the opera, but he doesn't want to waste the $100 he spent on the opera ticket.

From the perspective of an economist, if Van decides to go to the party with Amy, what has he just done?

1. Incorrectly allowed a sunk cost to influence his decision

2. Made a choice that was not optimal

3 Correctly ignored a sunk cost

Answer 1

Answer:

The right choice is "3 Correctly ignored a sunk cost"

Explanation:

As the ticket to the opera was already bought and it is nonrefundable, nonexchangeable, and nontransferable; whether Van decides to go to the opera or to go to the party with Amy; he has incurred $100 cost of ticket which can not be recovered in any manner.

The ticket cost in this question is categorized as sunk cost - cost that incurred in the past and will be remained the same regardless of any future actions. Thus, this type of cost should be ignored when making decision for the future.

So, "3 Correctly ignored a sunk cost" is the correct choice.