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What Is an Incremental Cash Flow? What Is a Sunk

question 46

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What is an incremental cash flow? What is a sunk cost? Why must you account for opportunity costs?


Definitions:

Short Run

A period in economic analysis where at least one factor of production is fixed, limiting adjustments to changes in demand or supply.

Long Run

A period in economics sufficient for all markets to reach equilibrium, where all inputs and outputs can be varied by firms, not constrained by existing physical capital.

ATC

Average Total Cost; the total cost per unit of output incurred when producing goods or services.

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