BEA683_lecture 4_Costs_2016

BEA683_lecture 4_Costs_2016 - Sunk Costs Economists often...

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Sunk Costs Economists often use the expression ‘Bygones are bygones’ when referring to Sunk Costs. In English, the expression can mean What is done is done; don’t worry about the past, especially past errors or grievances. For example, Bill and Tom shook hands and agreed to let bygones be bygones. Economists seem to be saying that we should ignore the past
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Gans on Sunk Costs individual A undertake x undertake y Value - outlay $100 - $30 $90 - $30 individual A undertake x undertake y Value - outlay $100 $90
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Misleads Revenue – variable costs – fixed costs Revenue – variable costs individual A undertake 9 units of output Value - outlay $100 - $45 - $10 = $45 $110 - $60 - $10 = $40 undertake 10 units of output undertake 9 units of output Value - outlay $100 - $45 = $55 $110 - $60 = $50 undertake 10 units of output
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individual A undertake MBA work at graduate
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