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Sunk cost. In economics and business decision-making, a sunk cost (also known as retrospective cost) is a cost that has already been incurred and cannot be recovered. [1] [2] Sunk costs are contrasted with prospective costs, which are future costs that may be avoided if action is taken. [3] In other words, a sunk cost is a sum paid in the past ...
Alamy There are some economic terms most of us know and understand, such as supply and demand. And there are other terms we will probably never even run across, like implicit logrolling and a ...
Opportunity cost, as such, is an economic concept in economic theory which is used to maximise value through better decision-making. In accounting, collecting, processing, and reporting information on activities and events that occur within an organization is referred to as the accounting cycle.
Contestable market. In economics, the theory of contestable markets, associated primarily with its 1982 proponent William J. Baumol, held that there are markets served by a small number of firms that are nevertheless characterized by competitive equilibrium (and therefore desirable welfare outcomes) because of the existence of potential short ...
Economics and business students are taught that sunk costs are irrelevant to their decisions. Yet, there is ample evidence that managers fail to integrate this simple rule and fall prey to what is known as the sunk-costs bias.
Fixed and Sunk Costs Revisited. Wang, X. Henry; Yang, Bill Z. Journal of Economic Education, v32 n2 p178-85 Spr 2001. Attempts to clarify the concepts of, and the link between, fixed costs and sunk costs. Argues that the root of confusion is the inconsistency in defining the term fixed costs. Consistently defines fixed and sunk costs, and ...
A relevant cost (also called avoidable cost or differential cost) [1] is a cost that differs between alternatives being considered. [2] In order for a cost to be a relevant cost it must be: It is often important for businesses to distinguish between relevant and irrelevant costs when analyzing alternatives because erroneously considering ...
The sunk-cost problem helps explain why it was so hard to end that war. It is worth considering this problem as we reflect on current wars. The sunk-cost fallacy applies in our thinking about the ...