Sunk Costs

question 30

Multiple Choice

Sunk costs

• A) should be taken into consideration when making decisions about future production.
• B) are costs that have been incurred as a result of past decisions.
• C) cause the profit-maximizing rule to no longer be useful.
• D) are future costs that one has to incur.
• E) are included only in economic profits.

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Definitions:

Government Purchases

Expenditures made by the government sector on final goods and services in a given time period, influencing the overall economy.

Transfer Payments

Payments made by the government to individuals without any expectation of a good or service in return, such as welfare or social security.

Net Taxes

Taxes paid by individuals or businesses after subtracting transfers and government subsidies.

Consumption

The act of using goods and services to fulfill individual or collective needs and desires, driving the demand side of an economy.