To the casual observer it is often difficult to understand how a company would spend several million dollars building a plant or other structure and then simply stop and abandon the project midway. How can this be justified on economic grounds?

Question

Quizplus · Accepted Answer

The Answer is The building or structure is viewed as a fixed cost. The firm may very well have determined that even if finished the project would not be profitable. Rather than incur additional expenses on a project that is likely not to be profitable it is better to cut losses and abandon production of the structure rather than complete it.

To the Casual Observer It Is Often Difficult to Understand