Question

What are sunk costs? Give an example from your own experience. Please include resources.

Answer 1

sunk costs those costs which have been incurred but it has given zero utility or less utility then expected and the cost can't be recovered or liquidate.we can understand this concept with following examples

example -

1. suppose your friend told you that a particular movie is worth to watch which would give anyone a thrill experience.you are impressed with your friend's review and thus went to watch the movie and you found the movie dull and boring thus your utility from the movie is zero or less than expected.but the theater is not giving you the refund and thus you can't recover the cost incurred.as a result this would be considered as sunk cost.
2. suppose, a construction of a bridge on a river was executing and all of a sudden government canceled the plan and thus the resources employed like material,manpower etc are totally wasted and it can't be recovered,moreover there is zero utility derived from the bridge. this would also be considered as a sunk cost.