bus tickets once the marginal utility just equals the opportunity cost. While we can’t (yet) say exactly how many

bus tickets Alphonso will buy, that number is unlikely to be the most he can afford, 20.

Sunk Costs

In the budget constraint framework, all decisions involve what will happen next: that is, what quantities of

goods will you consume, how many hours will you work, or how much will you save. These decisions do not

look back to past choices. Thus, the budget constraint framework assumes that sunk costs, which are costs

that were incurred in the past and cannot be recovered, should not affect the current decision.

Consider the case of Selena, who pays $8 to see a movie, but after watching the film for 30 minutes, she knows

that it is truly terrible. Should she stay and watch the rest of the movie because she paid for the ticket, or

should she leave? The money she spent is a sunk cost, and unless the theater manager is sympathetic, Selena
{"file_name": "Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "file_size_mb": 26.99, "moddate": "2022-12-07T14:23:05-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "total_pages": 597}