Answer to Question #92060 in Economics of Enterprise for fere

Question

1.You have good tickets to a basketball game an hour’s drive away. There’s a blizzard raging outside, and the game is being televised. You can sit warm and safe at home and watch it on TV, or you can bundle up, dig out your car, and go to the game. What do you do?

a.What type of cost is your expenditure on tickets?

Answer 1

Sunk costs are those expenditures incurred by a firm that cannot be recovered. In the same sense, the expenditure on the tickets is also a sunk cost because at the time of game expenditure incurred on the tickets could not be recovered.

I have only two options either to watch the game or not but in no circumstances I would be able to get my money back. In other words, the current opportunity cost of these tickets is zero because these tickets do not have any alternative use and any expenditure that is incurred on any good or service that does not have any alternative use is regarded as sunk cost. So, in terms of opportunity cost also expenditure on tickets, at the time of game, is sunk cost.