The cost of a resource that may be relevant to an investment decision even when no cash changes hand is called a(n)
A)sunk cost.
B)opportunity cost.
C)depreciation cost.
D)average cost.

Question

Quizplus · Accepted Answer

Opportunity cost refers to the value of the next best alternative forgone when making a decision. It may not involve a cash transaction, but it is still relevant to consider when making investment decisions. A sunk cost is a cost that has already been incurred and cannot be recovered, and is not relevant to future investment decisions. Depreciation cost refers to the decrease in value of an asset over time, and is relevant for accounting purposes but not necessarily for investment decisions. Average cost refers to the total cost divided by the quantity produced, and is not relevant to individual investment decisions.

The Cost of a Resource That May Be Relevant to an Investment