10 Questions
What is the main difference between explicit costs and implicit costs?
Explicit costs are monetary payments made to suppliers, while implicit costs are the values of self-owned resources used by the firm.
Which of the following is an example of an implicit cost?
The estimated value of the owner's time spent managing the business
Why do economists and accountants define and treat costs differently?
Economists and accountants have different goals and perspectives in analyzing business activities.
Which of the following is NOT considered an explicit cost for a business firm?
The estimated value of the owner's time spent managing the business
Why are explicit costs also referred to as 'accounting costs'?
Because they are the costs of purchased inputs, which are the only costs relevant for accounting purposes.
Which of the following is included in economic cost but not in accounting cost?
Implicit costs
Which of the following is an example of a fixed cost?
Rent on leased properties
If a firm's total cost is $100,000 and its total fixed cost is $40,000, what is its total variable cost?
$60,000
If a firm's total variable cost is zero, what can be inferred about its output level?
The firm is not producing anything
Which of the following statements is true about explicit costs?
They are out-of-pocket expenses for purchased inputs
Learn about the differences between economic and accounting costs in production and cost analysis. Understand how economic costs include implicit costs along with explicit costs, while accounting costs focus on purchased inputs. Explore the various expenses considered in economic and accounting cost calculations.
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