Chapter 2, Problem 52P

The following terms are used to describe various economic characteristics of costs.

1. a. Opportunity cost
2. b. Out-of-pocket cost
3. c. Sunk cost
4. d. Differential cost
5. e. Marginal cost
6. f. Average cost

Required: Choose one of the terms listed above to characterize each of the amounts described below.

1. 1. The cost of feeding 500 children in a public school cafeteria is $800 per day, or $1.60 per child per day. What economic term describes this $1.60 cost?
2. 2. The cost of including one extra child in a day-care center.
3. 3. The cost of merchandise inventory purchased two years ago, which is now obsolete.
4. 4. The management of a high-rise office building uses 2,500 square feet of space in the building for its own management functions. This space could be rented for $250,000. What economic term describes this $250,000 in lost rental revenue?
5. 5. The cost of building an automated assembly line in a factory is $800,000. The cost of building a manually operated assembly line is $375,000. What economic term is used to describe the difference between these two amounts?
6. 6. Referring to the preceding question, what economic term is used to describe the $800,000 cost of building the automated assembly line?
7. 7. The cost incurred by a computer manufacturer to produce one more unit in its most popular line of laptop computers.