The following terms are used to describe various economiccharacteristics of costs: Opportunity Cost Average Cost Sunk CostOut-of-pocket Cost Differential Cost Required: Choose one of thepreceding terms to characterize each of the amounts describedbelow. Each term may be used only once (5 Points). (1). The cost ofmerchandise inventory purchased five years ago. The goods are nowobsolete. (2). The cost of feeding 300 children in a public schoolcafeteria is $450 per day, or $1.50 per child per day. Whateconomic term describes this $1.50 cost? (3). The management of ahigh-rise office building uses 3,000 square feet of space in thebuilding for its own administrative functions. This space could berented for $30,000. What economic term describes this $30,000 oflost rental revenue? (4). The cost of building an automatedassembly line in a factory is $700,000; a manually operatedassembly line would cost $250,000. What economic term is used todescribe the $450,000 variation between these two amounts? (5).Refer to the preceding question and assume that the firm iscurrently building the assembly line for $700,000. What economicterm is used to describe the $700,000 construction cost?
