Some online penny auctions charge a fee, such as $1, for every bid placed
Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?
The $1 charge per bid should be considered a sunk cost because this is a cost that has already been paid and cannot be recovered. Even if a person has the winning bid for an auction, each bid he or she placed will cost and extra $1 on top of the winning bid, so whether a person wins or loses, all bids must be paid for. Since sunk costs cannot be recovered, someone who has "invested" $5 in bidding costs would not be smart to keep bidding to protect this investment.
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