Which term refers to a cost already spent and cannot be recovered?

• A. Sunk cost
• B. Sunk cost fallacy
• C. Emotional investment
• D. Loss aversion

Answer: (A)

A sunk cost is a cost that has already been spent and cannot be recovered. Because it’s in the past and not recoverable, it should not drive future decisions; what matters is the future costs and benefits from any choice you make now. The term sunk cost specifically names that already-incurred expense. The related idea, the sunk cost fallacy, describes the mistake of letting those past costs influence current decisions, but it’s distinct from the cost itself. Emotional investment and loss aversion describe other ideas—feelings tied to outcomes and the tendency to fear losses more than equivalent gains, respectively.