A Sunk Cost Is One That

question 304

Multiple Choice

A sunk cost is one that

• A)changes as the level of output changes in the short run.
• B)was paid in the past and will not change regardless of the present decision.
• C)should determine the rational course of action in the future.
• D)has the most impact on profit-making decisions.

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Definitions:

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.

Cash Flows

The movement of money into and out of a business, project, or investment, critical for assessing financial health.

GDP

Gross Domestic Product, the total value of all goods and services produced within a country's borders in a specific time period.

Living Standards

The level of wealth, comfort, material goods and necessities available to a certain socioeconomic class or geographic area.