Explore BrainMass

Explore BrainMass

    Variable cost plus fixed costs equal total costs.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Variable cost plus fixed costs equal total costs. Why would a firm sell its products as long as the revenue covers the variable costs? What are sunk costs? If Marginal Cost is close to zero, why would a company give away many units? What are some examples of products that have close to zero marginal cost? Why is it important to know the various costs of a product?

    © BrainMass Inc. brainmass.com June 4, 2020, 12:46 am ad1c9bdddf

    Solution Preview

    First we discuss sunk costs.

    Sunk costs are costs that are the firm cannot recover regardless of its decision whether to produce or not. Long term costs are generally sunk costs (such as renting the factory).

    Because sunk costs cannot be recovered, they are not considered in short term decision making. In short run, only the variable cost is considered. For example, if I own a factory, and my fixed ...

    Solution Summary

    This solution goes over the different types of costs within the context of business management.