A fixed cost that the firm cannot avoid if it shuts down and produces zero output must be:
A)an accounting cost.
B)a marginal cost.
C)an equilibrium cost.
D)a sunk cost.

Question

Quizplus · Accepted Answer

A fixed cost that the firm cannot avoid even if it shuts down and produces zero output is a sunk cost. This cost has already been incurred and cannot be recovered, so it should not factor into the decision-making process for future production. A fixed cost that the firm cannot avoid if it shuts down and produces zero output is called a sunk cost. This means that even if the firm shuts down, it will still have to pay the fixed cost. This is different from an accounting cost, which is a cost that is recorded in the firm's accounting books, a marginal cost, which is the cost of producing one more unit of output, and an equilibrium cost, which is not a commonly used term in economics.

A Fixed Cost That the Firm Cannot Avoid If It