Sunk Costs

Sunk costs refer to money or resources that have already been spent and cannot be recovered. In cost-benefit analysis, it’s essential to ignore sunk costs when making decisions because they shouldn't affect future choices. Instead, you should focus on potential future costs and benefits. For example, if you’ve invested in a project that isn’t working out, continuing to invest just because of what you've already spent may lead to greater losses. The key is to look forward and decide based on what will benefit you moving ahead, rather than on past expenses that can't be changed.