ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A sunk cost refers to money that has already been spent and cannot be recovered.

Detailed explanation-2: -A sunk cost, sometimes called a retrospective cost, refers to an investment already incurred that can’t be recovered. Examples of sunk costs in business include marketing, research, new software installation or equipment, salaries and benefits, or facilities expenses.

Detailed explanation-3: -A sunk cost is an irretrievable cost. Once spent, the sunk cost cannot be recovered when the firm leaves the industry. A sunk cost is incurred in the past and cannot be changed. A non-sunk cost is a cost that will only occur if a particular decision is made.

Detailed explanation-4: -Sunk costs are historical costs which have already been incurred. 2. Shut down costs are those costs which have to be incurred even if production or operation of an undertaking are discontinued temporarily due to strike or other reasons.

Detailed explanation-5: -This tendency, which is known as the sunk cost effect, can be illustrated by the adage “throwing good money after bad.” In nature, the sunk cost effect is known as the Concorde effect.