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

Quizplus · Accepted Answer

The $10,000 rent is a fixed cost because it does not change with the quantity produced or sold. It is also a sunk cost because it has already been paid and cannot be recovered if the firm decides to not use the factory. Therefore, the correct choice is C, both a fixed cost and a sunk cost.

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