Reference no: EM133129003

Within a given time period, (i.e. the economic short run), some costs of production are completely insensitive to the quantity of output a firm produces. They remain the same whether the firm produces zero or a million units of output. These are called fixed costs. In some circumstances a fixed cost can be a sunk cost whilst in other circumstances fixed costs cannot be sunk costs.

In terms of this statement, motivate whether the following examples of costs that are likely to remain fixed for a number of different firms across a range of different sectors can be sunk costs.

1. Advertising campaign to launch a new product

2. Provision of electricity, (power), and lighting for the business premises

3. Complying with government regulation