Question

when fixed costs are ignored because they are irrelevant to a business's production decision, they are called question 22 options: explicit costs. implicit costs. sunk costs. opportunity costs.

Answer 1

Fixed expenses like interest or lease payments typically occur repeatedly. When fixed costs are ignored, they are referred to as "sunk costs."

Why would a fixed expense be disregarded?

Fixed costs are sunk costs because they were incurred in the past and cannot be changed, so they shouldn't be taken into consideration when making decisions regarding pricing or production in the future. Since variable costs often exhibit diminishing marginal returns, higher levels of output have higher marginal costs to produce.

What occurs to fixed costs if a company doesn't create anything?

The drawback of constant costs, also known as ongoing or continuing expenses, is that they must be covered even if a company does not generate anything, such as when it is temporarily closed. Depending on whether a corporation produces more, less, or nothing at all, variable costs will alter right away.

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