In the short run, certain costs, such as rent on land and equipment, must be paid whether or not any output is produced. These are:
a. the firm’s variable costs.
b. the firm’s break-even costs.
c. the firm’s sunk costs.
d. the firm’s fixed costs.
e. the firm’s marginal costs.
Answer
c. the firm’s sunk costs.
These are sunk because they include those costs that has already been incurred and thus cannot be recovered
Explanation
We classify this under the sunk costs because despite the money spent on them, these kind of costs are dollars or the amount of money that are already spent and permanently lost and cannot be refunded nor be recoverable in any way. For example, once rent is paid, that dollar amount is no longer recoverable. Furthermore, these costs cannot be considered when making the decision to continue investing in an ongoing project, since they are not recoverable
