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Unformatted text preview: ontinuation payoff is $800m ($500m + $500m) = $-200. Thus, full reversibility – no sunk costs – is just like
having perfect foresight. (If you can correct mistakes without costs then there is
no disadvantage to proceeding with less than full information). 19. B
Sunk costs are irrelevant to how we proceed, but history more generally is
relevant because we can learn from it. 20. D * There is no truth to this story. 11 Economics 113
Introduction to Economics for Policy Analysis
1. The key feature of an economic approach to social welfare is
A. a focus on Gross Domestic Product.
B. the imperative of economic growth.
C. the central role of individual preferences.
D. monetary costs and benefits.
2. Economists focus on individual preferences partly because
A. preferences are more important than ethics or morals.
B. preferences are easily measured.
C. that approach is broadly consistent with a liberal democratic political structure.
D. All of the above.
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This document was uploaded on 03/03/2014.
- Spring '14