Practice question · True or false
In the rational model, a decision should account for money already spent so that past investment is not wasted.
Hints
- Can a past payment change a future outcome?
- Sunk costs.
Show the answer
False
Why
False. Money already spent is unrecoverable whatever you now choose, so it should not enter the comparison at all, only future costs and benefits differ between the options. Letting it in is the sunk-cost fallacy, and 'we have already put in three years' is its usual form.
Practise Decision Making
The app has 6 more questions on this lesson, and keeps your place in the course. Business I is free to start.
More questions on Decision Making
- A hiring manager interviews candidates until one clears the bar of "clearly capable," then stops searching.…
- When is intuition a _reliable_ decision input?
- Simon called stopping at the first acceptable option satisficing and treated it as intelligent rather than…
- Order the steps of the rational decision model.
- Option A pays 100 with probability 0.5, else 0. Option B pays 40 for sure. Compute the difference EVA - EVB.
- Match each decision model to its signature.