Which term refers to unrecoverable costs incurred on decisions made in the past?

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Multiple Choice

Which term refers to unrecoverable costs incurred on decisions made in the past?

Unrecoverable costs incurred in the past are called sunk costs. They’re money already spent that can’t be recovered, so they shouldn’t influence choices about the future. When evaluating options, focus on future costs and benefits that will change depending on the decision, and ignore the money already spent. That’s what makes sunk costs the right concept here. The other terms don’t fit: “book costs” isn’t a standard cost-analysis term; “opportunity costs” are the value of the next-best alternative you give up, not past, unrecoverable expenses; and “money supply” is a macroeconomic measure, not a cost concept in decision making.

Unrecoverable costs incurred in the past are called sunk costs. They’re money already spent that can’t be recovered, so they shouldn’t influence choices about the future. When evaluating options, focus on future costs and benefits that will change depending on the decision, and ignore the money already spent. That’s what makes sunk costs the right concept here. The other terms don’t fit: “book costs” isn’t a standard cost-analysis term; “opportunity costs” are the value of the next-best alternative you give up, not past, unrecoverable expenses; and “money supply” is a macroeconomic measure, not a cost concept in decision making.

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