Which type of cost reflects a stair-step pattern in costs as output changes?

• A. A variable cost
• B. A sunk cost
• C. A step cost
• D. A fixed cost

Answer: (C)

Verified step by step guidance

1. Understand the different types of costs in microeconomics: variable costs change continuously with output, fixed costs remain constant regardless of output, sunk costs are past costs that cannot be recovered, and step costs increase in discrete increments.
2. Recognize that a stair-step pattern means costs remain constant over a range of output but jump to a higher level once output exceeds certain thresholds.
3. Identify that variable costs change smoothly and continuously, so they do not exhibit a stair-step pattern.
4. Note that fixed costs remain constant and do not increase in steps as output changes.
5. Conclude that the cost type which increases in discrete steps as output changes is called a step cost, reflecting the stair-step pattern.