Asked by
Catherine Chong
on Nov 04, 2024
Verified
Amy spends $6,000 on remodeling a storefront that she then opens as a take-out deli. After opening her deli her business is terrible and she needs an additional $2,000 to keep the deli open. Which of the following is true?
A) The $6,000 Amy spent on remodeling represents a part of the total variable cost of her business.
B) The $6,000 Amy spent on remodeling represents a sunk cost of her business.
C) The $2,000 Amy needs to keep the deli open represents her marginal costs of production.
D) The $2,000 Amy needs to keep the deli open represents her total fixed costs.
Sunk Cost
Expenses that have already been incurred and cannot be recovered, and should not affect future economic decisions.
Remodeling
The process of improving or updating the structure, layout, or appearance of an existing building or space.
Marginal Costs
The expense incurred from the manufacture of an extra single product or service unit.
- Comprehend the significance of sunk costs and its implications for business decision-making.
- Apply the concept of marginal costs and its relation to business production decisions.
Verified Answer
JZ
Learning Objectives
- Comprehend the significance of sunk costs and its implications for business decision-making.
- Apply the concept of marginal costs and its relation to business production decisions.