Editing Microeconomics (section)

=== Fixed and variable costs ===
* [[Fixed cost]] (FC) – This cost does not change with output. It includes business expenses such as rent, salaries and utility bills.
* [[Variable cost]] (VC) – This cost changes as output changes. This includes raw materials, delivery costs and production supplies. 

Over a short time period (few months), most costs are fixed costs as the firm will have to pay for salaries, contracted shipment and materials used to produce various goods. Over a longer time period (2-3 years), costs can become variable. Firms can decide to reduce output, purchase fewer materials and even sell some machinery. Over 10 years, most costs become variable as workers can be laid off or new machinery can be bought to replace the old machinery <ref>{{cite web |title=Principles of Microeconomics (Curtis and Irvine) |url=https://socialsci.libretexts.org/Bookshelves/Economics/Principles_of_Microeconomics_(Curtis_and_Irvine) |website=Social Sci LibreTexts |language=en |date=5 July 2021}}</ref>

[[Sunk cost]]s – This is a fixed cost that has already been incurred and cannot be recovered. An example of this can be in R&D development like in the pharmaceutical industry. Hundreds of millions of dollars are spent to achieve new drug breakthroughs but this is challenging as its increasingly harder to find new breakthroughs and meet tighter regulation standards. Thus many projects are written off leading to losses of millions of dollars <ref>{{cite book |last1=Pindyck |first1=Robert S. |title=Microeconomics |date=2018 |location=Harlow, UK |isbn=978-1292213378 |edition=9th}}</ref>