Q1- A firm can incur fixed costs and sunk costs. Briefly explain the difference between a fixed
Question:
Q1- A firm can incur fixed costs and sunk costs. Briefly explain the difference between a fixed cost and a sunk cost.
Q2- Adidas and Nike canceled the contracts they made with Kanye West and Kyrie Irving after the celebrities were accused of making anti-Semitic comments. "Mr. West became worth so much to the company's bottom line that Adidas hesitated to end his contract... Mr. Irving's lucrative brand meant so little to Nike that it could afford to cancel his next shoe one day after he apologized." Did Adidas treat the cost of the contract it canceled with Kanye West as a sunk cost or a fixed cost? Did Nike treat the cost of the contract it canceled with Kyrie Irving as a sunk cost or a fixed cost? Briefly explain your answers.
Q3- The actions a firm makes to continually differentiate its products is called brand management. Nike differentiates its products by paying professional athletes to endorse its products. Nike pays Lebron James $30 million annually to endorse his brand of sneakers. Refer to the graph you drew to answer the previous question. (I) How does the annual payment to Lebron James affect the supply curve for his brand of sneakers? (II) How does the endorsement of his brand of sneakers affect the demand for Lebron Sneakers?
Reference
Hayes, A. (2023, January 17). Fixed Cost: What It Is and How It's Used in Business. Retrieved from Investopedia: https://www.investopedia.com/terms/f/fixedcost.asp
Ross, S. (2023, January 20). Are All Fixed Costs Considered Sunk Costs? Retrieved from Investopedia: https://www.investopedia.com/ask/answers/042015/are-all-fixed-costs-sunk-costs.asp
Touvila, A. (2022, August 09). What Is a Sunk Costand the Sunk Cost Fallacy? Retrieved from Investopedia: https://www.investopedia.com/terms/s/sunkcost.asp