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Fixed and Sunk Costs Revisited

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  • X. Henry Wang
  • Bill Z. Yang

Abstract

The authors attempt to clarify the concepts of, and the link between, fixed costs and sunk costs. They argue that the root for possible confusion between fixed costs and sunk costs is the inconsistency in defining the term fixed costs. They define fixed costs uniformly as the costs that are independent of the level of output and suggest that instructors refer to the part of fixed costs that are irrevocably committed as sunk costs . Under these definitions, the statement “there are no long-run fixed costs” is incorrect. Instructors should teach students that in the long run there are no sunk costs, although there may easily be fixed costs.

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File URL: http://hdl.handle.net/10.1080/00220480109595183
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of Economic Education.

Volume (Year): 32 (2001)
Issue (Month): 2 (January)
Pages: 178-185

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Handle: RePEc:taf:jeduce:v:32:y:2001:i:2:p:178-185

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Cited by:
  1. Amoroso, S., 2013. "Heterogeneity of innovative, collaborative, and productive firm-level processes," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5663713, Tilburg University.

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