This problem asks you to think carefully about sunk costs.
a. The International Space Station (ISS) is a habitable satellite that was launched by NASA and space agencies of other countries. In 2009, NASA was considering shutting down the ISS within the next 5 to 6 years. Among those who were opposed to this idea of de-orbiting the ISS was Senator Bill Nelson, who was quoted as saying, “If we've spent a hundred billion dollars, I don't think we want to shut it down in 2015.” Identify the flaw in the Senator's reasoning.
b. You are planning to build an apartment building. Your market research department estimates that your revenues will be $9.0 million. Your engineering department estimates the cost will be $6.0 million. You have started construction and spent $1.5 million to build the foundation when the recession begins. This causes the market research department to revise its revenue estimates downward to $4.0 million. Should you complete the apartment building?