Smith Industries Is Considering Replacing a Machine That Is Presently

question 48

Multiple Choice

Smith Industries is considering replacing a machine that is presently used in its production process.The following information is available: Which of the following amounts represents a sunk cost?

• A)$55,000
• B)$33,000
• C)$9,000
• D)$45,000

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Definitions:

Average Variable Cost

The total variable costs (costs that change with the level of output) of production divided by the quantity of output produced.

Short Run

A time period in which at least one input is fixed and cannot be changed by the firm, affecting its production decisions.

Purely Competitive Market

Another term for a perfectly competitive market, emphasizing its features like a large number of small firms and identical products.

Marginal Revenue

The increased earnings resulting from the sale of one extra unit of a good or service.