The faculty of Mistaken University is voting on a curricular reform. Members of the faulty have been working on the proposed curriculum for over four years. Some faculty members are going to vote for the reform because so much time and money has already been invested in it. Explain why these faculty members are mistaken in their reasoning.
What will be an ideal response?
The investment of time and money in the proposed curricular reform are sunk costs and should not be included in the decision of whether to vote for the reform or not. Those faculty members (not the economists of course!) who do consider such costs suffer from the sunk cost fallacy.
You might also like to view...
When the price of peaches went up, people bought fewer peaches and more strawberries. This is an indication that tastes have changed as a result of the price increase.
Answer the following statement true (T) or false (F)
When the coupon rate on newly issued bonds increases relative to older, outstanding bonds, what happens?
A) The market price of the older bond falls in the secondary market. B) The market price of the older bond rises in the secondary market. C) Older bonds will sell for more than their face value. D) Older bonds can still be sold at their face value.
Which of the following is likely to have the narrowest bid-asked spread?
A) A Nasdaq stock B) A U.S. Treasury bill C) A corporate bond D) A Fannie Mae bond
Which of the following is characteristic of a firm that is a competitive price searcher?
a. The firm faces an upward-sloping demand curve. b. The firm faces an inelastic demand curve. c. The firm faces a horizontal demand curve. d. The firm produces a differentiated product.