Fixed costs
A)are always sunk.
B)are avoidable.
C)are sometimes sunk.
D)sunk in the short run, but not in the long run.

Question

Quizplus · Accepted Answer

Fixed costs can be either sunk or avoidable depending on the situation. For example, the cost of purchasing a building for a business is a sunk cost as it cannot be recovered if the business closes. However, the cost of a long-term lease can be avoidable if the business decides not to renew the lease. Therefore, the statement that fixed costs are always sunk or avoidable is incorrect.

Fixed Costs