Fixed costs are ignored in allocating scarce resources because
A)they are sunk.
B)they are unaffected by the allocation of scarce resources.
C)there are no fixed costs associated with scarce resources.
D)fixed costs only apply to long-run decisions.

Question

Quizplus · Accepted Answer

Fixed costs are those costs that do not change with changes in the level of production or allocation of resources. Since they are unaffected by the allocation of scarce resources, they are not considered in the decision-making process when allocating resources. Sunk costs are also ignored in decision-making because they are costs already incurred and cannot be recovered regardless of the decision made.

Fixed Costs Are Ignored in Allocating Scarce Resources Because