You are about to open a business and must obtain a license from the city for $25,000. The license is transferable, but only $4,000 is refundable in the event the firm does not use the license.

a.What are your fixed costs? What are your sunk costs?

b.Suppose the manager obtains a license but then decides against opening the business. If another firm offers the manager $3,000 for the license, should the manager accept the offer? Explain.