Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The economist's advice is based on the concept of sunk costs, which are costs that have already been incurred and cannot be recovered. The rational
The economist's advice is based on the concept of sunk costs, which are costs that have already been incurred and cannot be recovered. The rational approach is to ignore sunk costs when making decisions about the future; what matters is the cost and benefit of the future options. According to this perspective, the decision to go to the game should be based on the current value of the experience versus the discomfort or cost of going out in the snow, not the price already paid for the tickets.
An average person might not feel comfortable ignoring the money spent on the tickets because it feels like wasting money, which can be a powerful emotional driver. This discomfort is due to the sunk cost fallacythe misconception that money already spent should influence future decisions.
A rational person would consider the utility or happiness they would derive from attending the game versus staying at home. If the utility of staying home avoiding bad weather, watching something else, etc. is higher than the utility of attending the game without the star player and dealing with the snow, the rational choice would be to stay home, regardless of the money spent on the tickets. This decisionmaking process is based on the marginal benefit of the current options, not the costs that cannot be changed.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started