Which of the following is always an irrelevant cost when making future economic decisions?

• A. Marginal cost
• B. Explicit cost
• C. Sunk cost
• D. Opportunity cost

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definition of each cost type: Marginal cost is the additional cost of producing one more unit; Explicit cost is a direct, out-of-pocket payment; Opportunity cost is the value of the next best alternative foregone; Sunk cost is a cost that has already been incurred and cannot be recovered.
2. Step 2: Recognize that relevant costs for future decisions are those that will change as a result of the decision, meaning they are avoidable or incremental.
3. Step 3: Identify that sunk costs are costs that have already been incurred and cannot be changed by any future decision, so they do not affect future economic choices.
4. Step 4: Compare sunk costs with the other costs: Marginal, explicit, and opportunity costs all can influence future decisions because they represent costs or benefits that vary with the decision.
5. Step 5: Conclude that sunk costs are always irrelevant in making future economic decisions because they cannot be recovered or altered by any current or future action.