Part 1. Definition
In this task you will be given a passage and a yes/no question based on the passage. You should answer the question using the information from the passage.
Part 2. Example
passage: Franchising is a way for small business owners to benefit from the economies of scale of the big corporation (franchiser). McDonald's and Subway are examples of a franchise. The small business owner can leverage a strong brand name and purchasing power of the larger company while keeping their own investment affordable. However, some franchisees conclude that they suffer the "worst of both worlds" feeling they are too restricted by corporate mandates and lack true independence. It is an assumption that small business are just franchisees, but the truth is many franchisers are also small businesses, Although considered to be a successful way of doing business, literature has proved that there is a high failure rate in franchising as well, especially in UK, where research indicates that out of 1658 franchising companies operating in 1984, only 601 remained in 1998, a mere 36%.
question: can a franchise be considered a small business?
Answer: Yes
Explanation: Based on the passage, a franchise can be considered a small business.
Part 3. Exercise
passage: Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. In that regard, both retrospective and prospective costs could be either fixed costs (continuous for as long as the business is in operation and unaffected by output volume) or variable costs (dependent on volume). However, many economists consider it a mistake to classify sunk costs as ''fixed'' or ''variable.'' For example, if a firm sinks $400 million on an enterprise software installation, that cost is ''sunk'' because it was a one-time expense and cannot be recovered once spent. A ''fixed'' cost would be monthly payments made as part of a service contract or licensing deal with the company that set up the software. The upfront irretrievable payment for the installation should not be deemed a ''fixed'' cost, with its cost spread out over time. Sunk costs should be kept separate. The ''variable costs'' for this project might include data centre power usage, for example.
question: is a fixed cost always a sunk cost?
Answer:
No