Which of the following changes as the output of the firm changes?

• A. Sunk cost
• B. Fixed cost
• C. Opportunity cost
• D. Variable cost

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the definitions of each cost type. A sunk cost is a cost that has already been incurred and cannot be recovered, so it does not change with output.
2. Step 2: Fixed costs are costs that remain constant regardless of the level of output produced by the firm, such as rent or salaries of permanent staff.
3. Step 3: Opportunity cost represents the value of the next best alternative foregone when a decision is made; it may or may not change with output depending on the context but is not a direct cost that varies with production.
4. Step 4: Variable costs are costs that change directly with the level of output, such as raw materials or hourly wages for labor that increase as more units are produced.
5. Step 5: Therefore, the cost that changes as the output of the firm changes is the variable cost, because it varies in direct proportion to the quantity produced.