For Which of the Following Decisions Are Sunk Costs Relevant

question 44

Multiple Choice

For which of the following decisions are sunk costs relevant?

• A) the decision to keep an old machine or buy a new one.
• B) the decision to sell a product at the split-off point or after further processing.
• C) the decision to accept or reject a special order offer.
• D) all of these.
• E) none of these.

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Definitions:

Saving Function

The relationship between the level of saving and the level of income, typically showing that saving increases as income increases.

Consumption Function

An economic formula that expresses the relationship between total consumption and gross national income, indicating how much households are likely to spend.

Disposable Income

Disposable income refers to the amount of money individuals or households have available to spend or save after income taxes are deducted.

Marginal Propensity

The ratio of change in an economic variable (e.g., consumption, saving) to a change in another economic variable (e.g., income).