Question

The budget constraint framework, which assumes that decision-makers are rational and make decisions at the margin, assumes that ______________________.

Answer 1

Answer:

Assumes that the sunk cost is irrelevant to the decision and should be ignored.

Explanation:

Sunk Cost is the cost or the amount of money which is already been spent and cannot be recovered. In other words, it is that cost which is spent in the business and it is unrecoverable in the near future.

As per the framework of the business constraint, it assumes that the decision makers are rational and take decisions at the margin by assuming that the sunk cost is irrelevant to the decision because it do not affect the decision made at the margin rule.