An entrepreneur has already invested heavily in an idea but new evidence shows weak demand. What is the correct decision principle?

Correct answer: Decide based on future prospects rather than only past spending

Money already spent is a sunk cost: it cannot be recovered by continuing a weak project. The rational question is whether additional resources are likely to produce sufficient future value compared with alternatives. New evidence about demand should therefore guide the decision. Investing more merely to justify past spending can deepen the loss. B is correct.