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Lorenzo has plans to go to an opera and already has a $100 nonrefundable, nonexchangeable, and nontransferable ticket. Now Neha, whom Lorenzo has wanted to date for a long time, asks him to a party. Lorenzo would prefer to go to the party with Neha and forgo the opera, but he doesnt want to waste the $100 he spent on the opera ticket. From the perspective of an economist, if Lorenzo decides to go to the party with Neha, what has he just done? O Incorrectly allowed a sunk cost to influence his decision O Made a choice that was not optimal O Correctly ignored a sunk cost

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Answer #1

Option C.

By deciding to go to a party with Neha, Lorenzo has correctly ignored a sunk cost.

Sunk cost is a cost that has already been incurred and hence it cannot be recovered.

As he had already paid $100 for the opera, he cannot recover the amount which is a sunk cost if he decides to go to a party.

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