A firm's opportunity costs of production are equal to itsGroup of answer choicesexplicit costs only.implicit costs only.explicit costs + implicit costs.explicit costs + implicit costs + total revenue.
Question
A firm's opportunity costs of production are equal to itsGroup of answer choicesexplicit costs only.implicit costs only.explicit costs + implicit costs.explicit costs + implicit costs + total revenue.
Solution
The opportunity costs of a firm's production are equal to its explicit costs + implicit costs.
Here's why:
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Explicit costs: These are the direct costs of production that a firm pays out to others. This includes wages, rent, materials, etc.
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Implicit costs: These are the indirect costs of using resources without necessarily paying money out. This could include the opportunity cost of the owner's time or capital.
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The opportunity cost of production is the sum of the explicit and implicit costs. It represents all the sacrifices made to produce something, whether they involve directly paying money out or not.
So, the correct answer is "explicit costs + implicit costs".
Similar Questions
Which of the following is an example of an implicit cost?Group of answer choicesInterest paid on the firm's debtRent paid by the firm to lease office spaceThe owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firmWages paid to workers
Cost paid in money to hire a resource isGroup of answer choicesan alternative-use cost.an implicit cost.an explicit cost.economic profit.
Explicit costs are also known as (direct/opportunity) costs. (Choose an option from the ones given within parenthesis.)
Total revenue minus the implicit and explicit costs of production is profit.
Profit computed using explicit costs as the only measure of costs is:Question 16Select one:a.explicit profit.b.accounting profit.c.implicit profit.d.economic profit.
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