Question

True/False

1. In the long run, all factors of production are variable.
2. A firm built an inventory of 16-bit chips for $50,000 last year. However, the introduction of 32-bit chips lowers the market price for 16-bit chips and the inventory can only be sold for $40,000 now. The sunk cost is $50,000.
3. Automobile manufacturers view the assembly-line workers as capital services.

Answer 1

1. In the long run, all factors of production are variable. - True
   (All factors are considered variable in long run.)
2. A firm built an inventory of 16-bit chips for $50,000 last year. However, the introduction of 32-bit chips lowers the market price for 16-bit chips and the inventory can only be sold for $40,000 now. The sunk cost is $50,000. - False
   (Sunk cost is the cost that can not be recovered. However, $40,000 is recovered of $50,000 so it not sunk cost.)
3. Automobile manufacturers view the assembly-line workers as capital services. - True
   (As assembly line workers combines parts to produce products so they are viewed as capital services.)