Which of the Following Statements Is False

question 27

Multiple Choice

Which of the following statements is false?

• A) Because value is lost when a resource is used by another project, we should include the opportunity cost as an incremental cost of the project.
• B) Sunk costs are incremental with respect to the current decision regarding the project and should be included in its analysis.
• C) Overhead expenses are associated with activities that are not directly attributable to a single business activity but instead affect many different areas of the corporation.
• D) When computing the incremental earnings of an investment decision, we should include all changes between the firm's earnings with the project versus those without the project.

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Definitions:

Second Unit

An additional or backup unit or system that serves as a replacement or supplement to the original.

Price-Searcher Markets

Markets where sellers have some discretion over the price of their products due to a lack of perfect competition.

Price-Taker Markets

Markets where individual firms have no control over the price of their products, due to perfect competition and homogeneous products.

Economic Profits

The difference between a firm's total revenue and all costs, including both explicit and implicit costs, representing the excess over the opportunity cost.