Question

Capital which can only be put to a single specific use is called
[Question ID = 1438]

• A. Sunk capital
• B. Fixed capital
• C. Working capital
• D. Floating capital

Hint:

The "Sunk Cost Fallacy" is a common trap where people continue an unsuccessful fishery project just because they have already invested so much money into specialized equipment that they can't sell.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
The question refers to an economic term for an investment that has no alternative use or resale value for a different purpose.

Step 2: Detailed Explanation:

• Sunk Capital: In economics, sunk capital (or sunk cost) refers to money that has already been spent and cannot be recovered. Specifically, in the context of assets, it refers to capital invested in specialized equipment that cannot be used for any other purpose. For example, a specialized fish-meal processing plant cannot easily be converted into a textile mill.

• Fixed Capital (B): Refers to long-term assets like buildings or land. While a fishing boat is fixed capital, it can often be resold or repurposed (e.g., for tourism), so it's not strictly "sunk" in all contexts.

• Working Capital (C): Money used for day-to-day operations (buying seeds, feed, paying wages).

• Floating Capital (D): Capital that is not fixed and can be easily moved or repurposed (like cash or inventories).

Step 3: Final Answer:
The capital is known as Sunk capital.