Hostage capital cannot exist:
A)when a firm only has variable costs.
B)if the firm is careful about its operations.
C)where there are no sunk costs.
D)in a democracy.

Question

Quizplus · Accepted Answer

Hostage capital refers to a situation where a firm has invested heavily in fixed or sunk costs, which makes it difficult for the firm to exit the market and results in holding the firm hostage to its investments. Therefore, if there are no sunk costs, hostage capital cannot exist.

Hostage Capital Cannot Exist