One of the most important rules of economics, business, and life is the sunk-Gost principle, "Let bygones be bygones." This means that sunk costs (which are bygone in the sense that they are unrecoverably lost) should be ignored when decisions are being made.
Only future costs, involving marginal and variable costs, should count in making rational decisions.
To see this, consider the following: We can calculate fixed costs in Table 8-1 as the cost level when output is 0. What are fixed costs? What is t11e profit maximizing level of output for the firm in Table 8-1 if price is $40 while fixed costs are $0? $55,000? $1 00,000? $1 ,000,000,000? Minus $30,000? Explain the implication for a firm trying to decide whether to shut down.