Molly Sharp Is Producing a Documentary About the Plight of the Six-Toed

question 230

Multiple Choice

Molly Sharp is producing a documentary about the plight of the six-toed ferrets of Sri Lanka.Molly has spent $125,000 of her own money on this project and the documentary is now complete.Molly just found out that no studio is willing to release her documentary and she must now shop it to cable television networks, where she knows she will not be able to recoup her investment.Which of the following statements regarding Molly Sharp's documentary is true?

• A)She should not try to have her documentary aired on television because she cannot recoup her $125,000 investment.
• B)Since the $125,000 is a sunk cost, she should still try to have her documentary aired on television even though she will not see a profit.
• C)The $125,000 is a variable cost, so will not be incurred if she chooses not to have her documentary aired.
• D)The $125,000 investment is an economic cost, and she will still make an accounting profit even if the television network willing to air her documentary pays her less than $125,000.

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Definitions:

Budget Line

A visual depiction showing every potential mix of two products that a specific income and price levels can buy.

Utility

In economics, the total satisfaction received from consuming a good or service.

Indifference Map

A graphical representation of different combinations of two goods or bundles among which a consumer is indifferent.

Indifference Curve

A graph representing combinations of goods or services among which a consumer is indifferent, showing preference levels and the trade-offs between different bundles.