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Why “in the long run” are there no sunk costs for businesses? Discuss how managers should treat sunk costs when making market entry or exist decisions.

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Paramjeet Chawla
Paramjeet ChawlaLv8
28 Sep 2019

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Related questions

Managers often make the mistake of basing decisions on the amount of time and effort that has gone into a project. In many cases, they are reluctant to cancel a project out of fear of being viewed as having wasted resources, or due to an emotional attachment to their prior choices. Why is this so? Should managers consider past investments when making decisions? Is the textbook's recommendations regarding sunk costs realistic in a modern corporate environment? Offer examples to support your arguments.

A7. The process of "creative destruction" in an oligopolistic industry suggests that (B) (C) (D) (E) no firm can survive in the long run. firms can enter and leave without incurring any sunk costs of entry. the prospect of keeping the resulting profits provides an incentive for firms to innovate, there are no costs of exit in oligopoly. profits are driven to zero by the entry of new firms.

WK2A1:

Many factors affect the demand for a product, which is a concern for management and the decision-making process. To correctly assess the demand for their products, managers must determine the effect of all relevant variables. Select a particular industry or product and define the following variables:

Inferior versus normal goods

Substitution and income effects

Derived demand

Changes in real and projected incomes

Discuss how these variables can affect the demand for your product or industry and what methods could be used to estimate the effect of these variables.

Consider this statement: Long-run cost curves are planning curves, while short-run cost curves are operating curves. Do you agree or disagree with this statement? Support your answer with an appropriate rationale. In your response, use the various cost concepts you have learned, as well as the concepts of economies and diseconomies of scale, incremental costs, and sunk costs. Provide examples and applications of these costs in your response.

Justify your choices with valid assumptions and logically driven arguments. Cite any sources using APA format.

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