What Do Economists Mean by the Phrase "Sunk Costs Are

question 69

Multiple Choice

What do economists mean by the phrase "sunk costs are sunk"?

• A) Sunk costs are irretrievable,but they do lower profits and thus affect the firm's output level.
• B) Sunk costs are a primary reason why marginal costs tend to increase.
• C) Sunk costs cannot be recovered and are irrelevant to future decision making.
• D) Sunk costs lower consumer welfare,because producers "pass on" these costs in the form of higher prices.

---

Definitions:

Degree of Monopoly

The extent to which a firm or a few firms control the market share of a particular product or service, indicating the level of market power.

Interindustry Competition

Competition among companies that produce different types of goods or services but compete for the same consumer dollars.

Foreign Competition

The competitive pressure domestic companies face from products and services offered by foreign firms in the same market.

Concentration Ratios

Concentration ratios measure the proportion of market share controlled by the largest firms within an industry, indicating the level of competition.