DATE 11/04 NAME. INS. DANA ALSAFADI I. Which of the following are implicit costs
ID: 1103202 • Letter: D
Question
DATE 11/04 NAME. INS. DANA ALSAFADI I. Which of the following are implicit costs for a typical firm? a. insurance costs b. electricity costs c. opportunity costs of capital owned and used by the firm d. cost of labor hired by the firm e. the cost of raw materials 2. The difference between a firm's total revenue and what must be paid to attract resources from their best altermative use is called a. total revenue b. utility c. economic profit d. cost e. production efficiency 3. A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to a year. His expenses at the sushi bar would be $50,000 for food and his brother for $6,000 $2,000 for gas and electricity. What are his explicit costs? a. $26,000 b. $66,000 c. $78,000 d. $52,000 e. $72,000 rmal profit is defined as a. accounting profit b. economic profit c. profit necessary to ensure that opportunity costs are covered d. accounting profit minus economic profit . economic profit minus accounting profitExplanation / Answer
1) Option C
Implicit costs are not directly paid for but are the costs that the firm have sacrificed implicitly, like the opportunity cost of the capital firm is using which could have earned interest had it been put in a bank.
2) Option C
Total revenue - total opportunity cost (implicit + explicit) is called the economic profit
3) Option D
Explicit costs are directly paid for and here the total cost paid is $52000. The amount of $20000 and $6000 is the implicit cost.
4) Option A
Normal profit is business profit from accounting purpose where opportunity costs are ignored.
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