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  • ECO 101 - Quiz3 - Spring 2021

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    ramisa tasrim
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    Sunk costs such as factory rent are irrelevant to a firm's decision to shutdown in the short run because fixed costs like rent must be paid regardless of whether the firm operates or shuts down. Therefore, sunk costs have no impact on the short run decision to shut down or continue producing since those fixed costs will be incurred either way.

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    ECO 101_Quiz3_Spring 2021 (3)

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    Sunk costs such as factory rent are irrelevant to a firm's decision to shutdown in the short run because fixed costs like rent must be paid regardless of whether the firm operates or shuts down. Therefore, sunk costs have no impact on the short run decision to shut down or continue producing since those fixed costs will be incurred either way.

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    15 views1 page

    ECO 101 - Quiz3 - Spring 2021

    Uploaded by

    ramisa tasrim
    Sunk costs such as factory rent are irrelevant to a firm's decision to shutdown in the short run because fixed costs like rent must be paid regardless of whether the firm operates or shuts down. Therefore, sunk costs have no impact on the short run decision to shut down or continue producing since those fixed costs will be incurred either way.

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    Quiz 3, ECO 101, Total marks: 10

    Question 1: Why are sunk costs irrelevant in the decision of a firm to shutdown in the short run?

    {20 words}

    - Sunk costs are irrelevant for decisions in the short-run fixed costs have to be paid regardless of
    whether a firm operates. Therefore, sunk costs are negligible in the decision of shutting down or
    producing. Factory rent, for instance, would have no impact on the decision to shut down in the short
    run.

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