Question

The passage suggests that which of the following is true of a manufacturer's fixed and sunk costs?

• A. The extent to which they are determined by market conditions for the goods being manufactured is frequently underestimated.
• B. If they are kept as low as possible, the manufacturer is very likely to realize significant profits.
• C. They are the primary factor that determines whether a manufacturer will realize economies of scale.
• D. They should be on a par with the fixed and sunk costs of the manufacturer's competitors.
• E. They are not affected by fluctuations in a manufacturing plant's throughput.

Answer 1

The correct option is E They are not affected by fluctuations in a manufacturing plant's throughput.

Option E is the correct answer.The passage states and explains that the sunk costs are not decreased by the fluctuations in the market value and production. The statements of options A,B,C and D are not supported by the text, and thus, are incorrect.