The Following Terms Are Used to Describe Various Economic Characteristics

question 7

Essay

The following terms are used to describe various economic characteristics of costs.
$\begin{array} { l r } \text { Opportunity cost } & \text { Differential cost } \\\text { Out-of-pocket cost } & \text { Marginal cost } \\\text { Sunk cost } & \text { Average cost }\end{array}$ Required:
Choose one of the preceding terms to characterize each of the amounts described below. Each term may be used only once.
A. The cost of including one extra child in a day-care center.
B. The cost of merchandise inventory purchased five years ago. The goods are now obsolete.
C. The cost of feeding 300 children in a public school cafeteria is $450 per day, or $1.50 per child per day. What economic term describes this $1.50 cost?
D. The management of a high-rise office building uses 3,000 square feet of space in the building for its own administrative functions. This space could be rented for $30,000. What economic term describes this $30,000 of lost rental revenue?
E. The cost of building an automated assembly line in a factory is $700,000; a manually operated assembly line would cost $250,000. What economic term is used to describe the $450,000 variation between these two amounts?
F. Refer to the preceding question and assume that the firm is currently building the assembly line for $700,000. What economic term is used to describe the $700,000 construction cost?

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Definitions:

Abyssal Zone

A deep part of the ocean, typically between 3,000 and 6,000 meters deep, characterized by very low temperatures, high pressures, and complete darkness.

Intertidal Zone

The area of shoreline that is exposed to the air at low tide and submerged under water at high tide, supporting a diverse range of life.

Euphotic Zone

The upper layer of a body of water through which sunlight can penetrate, allowing photosynthesis by aquatic plants and phytoplankton.

Coral Reef

Marine ecosystems characterized by underwater structures made from calcium carbonate secreted by corals, hosting a vast array of biodiversity and serving as important habitats.