Unformatted text preview: 2. They fail to ignore sunk costs
3. They are overly optimistic about their ﬁiture behavior Opportunity cost: The highest valued alternative that must be given up to engage in an activity.
Sunk cost: A cost that has already been paid and cannot be recovered. Indifference Curve: A curve that shows the combinations of consumption bundles that give the
consumer the same utility. Marginal rate of substitution (MRS): The slope of indifference curve; represents the rate at
which a consumer would be willing to trade off one good for another. ...
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- Spring '11