Question

(Consider This) Susie purchased a nonrefundable ticket to a soccer match for $20. It will cost her $10 worth of gas and wear and tear to drive to the match and $5 to park her car. On the day of the match, Susie's boss offers her $100 to come to work instead. In considering what to do, which of the above would be considered a sunk cost?

Answer 1

Answer: The nonrefundable $20 ticket is the sunk cost.

Explanation: A sunk cost is a cost that has already been incurred and which cannot be recovered.

However, a prospective cost is a future cost that is yet to be incurred and which can be avoided if an action or inaction is taken.

Therefore, from the scenario in the question above, we can see that Susie has already purchased the soccer match ticket which costs $20, and she is yet to incur the costs of gas, wear and tear, and parking fee.

Hence, the $20 is the sunk cost because it has already been incurred and cannot be recovered, while the $10 for gas and wear and tear, and $5 for parking are the prospective costs that will be avoided.