ECONOMICS

Detailed explanation-1: -A sunk cost is money already spent in the past, while opportunity cost is the potential returns not earned in the future on an investment because the capital was invested elsewhere.

Detailed explanation-2: -Sunk costs usually affect only the company’s recent profit, such as its profit for the current fiscal year. Opportunity costs don’t affect a company’s profit. Instead, the return on investments you may earn from making a financial decision can affect the company’s profit for a particular period.

Detailed explanation-3: -Summary. In both economics and business decision-making, sunk cost refers to costs that have already happened and cannot be recovered. Sunk costs are excluded from future decisions because the cost will be the same regardless of the outcome.

Detailed explanation-4: -The relevant costs are contrasted with the potential revenue of one choice compared to another. To make an informed decision, a business only considers the costs and revenue that will change as a result of the decision at hand. Because sunk costs do not change, they should not be considered.