To explain: If the thought of finishing an expensive meal even if the appetite is full is right or not.
Concept Introduction:
Sunk costs are costs which cannot be recovered once it’s incurred. The business does not consider sunk costs when planning on the production or selling of the goods, because they cannot alter these costs to reduce total costs or increase revenue. Sunk costs are a part of every business organization. Thus, one can work effectively to reduce these sunk costs.
Explanation of Solution
Since the cost of the expensive meal is already incurred, it cannot be recovered. Thus, it is a sunk cost. Since now the sunk cost is already incurred, it should not be considered in the decision making to maximize utility. Thus, if an individual cleans their plate despite being full, they are reducing their utility because they have already received the maximum utility from the dish when they are full. Irrespective of eating the entire dish or leaving it halfway, still means you have paid for the entire dish. Thus, one can rather choose to share the dish or pack the leftovers to eat at home, thus, keeping their utility intact.
Want to see more full solutions like this?
Chapter 2 Solutions
Econ Macro (book Only)
- How does a consumer determine how much of a good he or she will buy?arrow_forwardWhat factors commonly influence a person’s daily buying choices? Select one of these and explain how one might counteract this influence to improve purchasing behavior.arrow_forwardIs buying a steak at the restaurant considered a good or service?arrow_forward
- You are shopping for new clothes and you like the style of a shirt. The store clerk tells you they have that shirt in red, blue, orange, and purple, and can offer it in the sizes small, medium, and extra large. How many different shirt options can this store offer?arrow_forwardHow would you define consumer behavior?arrow_forwardExplain what the utility maximizing choice means. Discuss how you could use marginal utility to make consumer choicesarrow_forward
- What does the point on a budget line indicate in terms of prices?arrow_forwardDo you think the model of consumer equilibrium describes how people really make the decisions on what to order to in a restaurant to maximize their utility? Is there a better model to measure consumer choice?arrow_forwardUsing the consumer choice theory, explain how an individual decides what combination of different products to buy?arrow_forward
- Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub CoEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning