In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of:
A) a fixed cost.
B) a variable cost.
C) an implicit cost.
D) an opportunity cost.
E) a sunk cost.

Question

Quizplus · Accepted Answer

Medallions are a one-time cost that is necessary for a taxicab to operate in New York City. Once purchased, they do not vary with the number of trips taken (variable cost), they are not a cost that is not recorded in accounting statements but still affects business finances (implicit cost), they are not a cost of choosing one alternative over another (opportunity cost), and they are not a cost that has already been incurred and cannot be recovered (sunk cost). Therefore, medallions are an example of a fixed cost.

In Order for a Taxicab to Be Operated in New