Question

4) Consider a decision that you made recently (i.e. within the last two weeks or so). Answer the following questions:

1. a) What were the benefits and costs that you considered when making your decision?

2. b) Would any of those costs that you identified in (a) above be considered sunk costs?

3. c) Were there any additional marginal benefits or marginal costs associated with the decision that you think you should have considered?

Answer 1

The decision made by me was that I changed my tuition center from my home to a rented accommodation.

a) The benefits of this decision were that: 1. Increase in the personal space for my family. 2. The social welfare of my family increased as there was having the negative externalities of the students (noise etc.).3. The distance of my office and the home was more as compared to rented accommodation. Now I can go by walk to the tuition from my office.

The costs of the decision were: 1. The rent(security ) taken by the landlord. 2. The transportation costs for the stuff because of shifting. 3. The paint I did to the rented accommodation.

b) Of course there is a sunk cost, the paint done to the rented accommodation.

c) I hadn't considered this benefit of the rented accommodation that due to the presence of Landlord the students maintained discipline which increased the efficiency and expectation of me capturing more market.