Phoebe and Rachel Quit Running in Central Park and Join

question 165

Multiple Choice

Phoebe and Rachel quit running in Central Park and join a health club to run on treadmills.This decision

• A)has no effect on GDP.
• B)increases GDP.
• C)decreases GDP.
• D)increases nominal but not real GDP.

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Definitions:

Fixed Costs

Costs that do not vary with the level of output or sales in the short term, such as rent or salaries.

Sunk Costs

Costs that have already been incurred and cannot be recovered or refunded, and thus should not factor into future decision-making processes.

Fixed Costs

Fixed expenditures that are unaffected by changes in production or sales volumes, like rent, wages, and insurance costs.

Marginal Cost

The cost incurred by producing one additional unit of a good or service.