Amy spends $6,000 on remodeling a storefront that she then opens as a take-out deli. After opening her deli her business is terrible and she needs an additional $2,000 to keep the deli open. Which of the following is true?
A) The $6,000 Amy spent on remodeling represents a part of the total variable cost of her business.
B) The $6,000 Amy spent on remodeling represents a sunk cost of her business.
C) The $2,000 Amy needs to keep the deli open represents her marginal costs of production.
D) The $2,000 Amy needs to keep the deli open represents her total fixed costs.

Question

Quizplus · Accepted Answer

The $6,000 spent on remodeling is a sunk cost because it is a past expense that cannot be recovered, regardless of the future success of the business.

Amy Spends $6,000 on Remodeling a Storefront That She Then