Final answer:
Sunk costs are past expenditures that should not influence current decisions, cautioning against the sunk cost fallacy and the sunk cost trap.
Explanation:
Sunk costs are expenditures that have been made and cannot be recovered. They should be ignored in decision-making processes as they are irrelevant to future outcomes.
Sunk cost fallacy refers to the tendency to continue investing in something that is no longer valuable due to past investments, leading to irrational decision-making.
It is crucial for individuals and firms to overcome the sunk cost trap by focusing on future prospects rather than past expenses.
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