ques3 - base their production decisions (whether to...

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Kathy Tao Econ 101 Sect 24 Question of the Week #5 The expressions “Sunk costs are sunk costs” and “Don’t cry over spilt milk” indicate that rational individuals shouldn’t dwell on costs that have been incurred and cannot be recovered (sunk costs) at the moment a decision is to be made. In other words, individuals should make their decisions regardless of the sunk costs, since their decision will not be able to change the sunk costs. For producers, this means that they should not
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Unformatted text preview: base their production decisions (whether to continue to produce or shut down, whether to produce more or produce less) on the sunk costs, that is, the fixed costs (such as rental lease on a factory). Instead, producers should base decisions on variable costs, costs that will change due to the decisions they make....
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