1.Opportunity cost is the cost of foregone opportunities, while sunk cost is a past expenditure that cannot...
Question:
1.Opportunity cost is the cost of foregone opportunities, while sunk cost is a past expenditure that cannot be recovered. Based on this conceptual distinction, fill the blank with "True" or "False". (4 points)
a)If a firm buys a forklift for $10,000 and can resell it for the same price, it is not a sunk expenditure and the opportunity cost of the forklift is $10,000.
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b)If instead the firm buys a specialized forklift for $10,000 and cannot resell it, then the original expenditure is a sunk cost.
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c)If the specialized forklift that originally cost $10,000 can be resold for $4,000, then only $6,000 of the original expenditure is a sunk cost, and the opportunity cost is $4,000.
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d) A sunk cost is not relevant to a firm's decision on how much to produce.
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