In Determining Whether to Keep a Machine or Replace It

question 19

True/False

In determining whether to keep a machine or replace it, the original cost of the machine is a sunk cost and is NOT a relevant factor.

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Definitions:

Consumer Surplus

The difference in the amount consumers are prepared to pay versus what they actually pay for goods or services.

Trucks

Large motor vehicles designed for transporting goods by road.

Government Revenue

Income received by the government from taxes and other sources used to fund public services and projects.

Tariff

A tax imposed by a government on goods and services imported from other countries, used to control trade and protect domestic industries.