Why do sunk costs not affect rational decision-making?

• A. Because sunk costs change with the level of output and thus should be ignored only when production is fixed.
• B. Because sunk costs are past expenditures that cannot be recovered and therefore do not affect the incremental costs or benefits of future choices.
• C. Because sunk costs represent part of the total cost and must always be included when comparing any alternatives.
• D. Because sunk costs will be recovered if you continue the activity, so they determine the future returns and decisions.

Answer: (B)