A sunk cost is a cost that:
Correct answer: A. Cannot be recovered after it is incurred
- A. Cannot be recovered after it is incurred
- B. Changes directly with the output level
- C. Is avoided when production temporarily stops
- D. Equals the firm's opportunity cost
Explanation
A sunk cost has already been incurred and cannot be recovered, so it should not affect current production decisions. A variable cost or avoidable fixed cost may change when output changes.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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