The Trap of Sunk Cost
Written by Studio AM.
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Imagine you have paid for a ticket to a film. Halfway through, you realize the film is dull and you would rather leave. Many people stay to the end anyway, telling themselves they should not 'waste' the money already spent. This is a small example of a wider trap.
The money for the ticket is gone whether you stay or go. Economists call it a sunk cost: a cost already paid that cannot be recovered, no matter what you choose next. A wise choice should weigh only what lies ahead, here more dull minutes against a free evening. The past payment should count for nothing, because nothing you do now can bring it back.
Yet people find this hard. Having put money, time, or effort into something, they feel bound to continue, hoping that continuing will make the earlier investment worthwhile. This is the sunk cost fallacy, and it keeps people in bad films, failing projects, and even unhappy plans long after the sensible move is to stop. The clearest question to ask is not 'How much have I already spent?' but 'What is the best choice from here?'
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Questions
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Question 1 of 4
The passage mainly explains
The answer is D: why past spending should not drive future choices
The passage explains the sunk cost fallacy: unrecoverable past spending should not decide what you do next.
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Question 2 of 4
What is a 'sunk cost'?
The answer is C: A cost already paid that cannot be recovered
The text defines a sunk cost as 'a cost already paid that cannot be recovered'.
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Question 3 of 4
The passage says the best question is 'What is the best choice from here?' because
The answer is C: Past costs cannot change, so only future outcomes matter
Since the sunk cost cannot be recovered, only future outcomes can still change, so a wise choice weighs 'what lies ahead'.
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Question 4 of 4
In this passage, 'fallacy' most nearly means
The answer is C: a mistaken way of thinking
The 'sunk cost fallacy' is treated as an error, so 'fallacy' means a mistaken way of reasoning.
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