A Fixed Cost That the Firm Cannot Avoid If It

question 38

Multiple Choice

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.

---

Definitions:

Long Run

A period in which all factors of production and costs are variable, and firms can adjust all inputs and technology to reach a desired output level.

Output

The total amount of goods or services produced by a person, machine, business, or economy.

Prices

The sum of money anticipated, needed, or provided as payment for something.

Classical Dichotomy

The theoretical separation of nominal and real variables in the economy, suggesting that changes in the money supply only affect nominal variables and not real variables like output.