Question

12. Suppose you recently made a confection which called for one cup of buttermilk The smallest container of buttermilk you could find was one pint (two cups). Having made it, you have one cup of buttermilk left. You do not like to drink buttermilk, but there is another dessert you could make which would use up your remaining cup. Suppose the pint of buttermilk originally cost 50 cents and the ther ingredients for the dessert cost $2.50. The value you place on the dessert is $2.70. Should you make the dessert? Why? .. could

Answer 1

Yes, we will make the desert. The buttermilk cost is sunk, and thus all that matters for consideration are the benefits and cost of moving forward. Thus the willingness to pay for the amount of $2.70 exceeds the costs $2.50 for making the dessert and thus should make the desert.