The owner of a firm signs a binding one-year lease on a factory for $10,000 rent a month and pays the first month's rent. The $10,000 rent is

Question

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The $10,000 rent is a fixed cost because it is a regular, recurring expense that does not change with the level of production. It is also a sunk cost because the first month's rent has already been paid and cannot be recovered.

The Owner of a Firm Signs a Binding One-Year Lease