Mastering Explicit and Implicit Costs

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Questions and Answers

Which of the following is an example of an explicit cost?

Return on entrepreneur's own investment
Salary of the proprietor
Prices of materials (correct)
Opportunity cost while allocating internal resources towards a project

Which of the following is an example of an implicit cost?

Opportunity cost while allocating internal resources towards a project
Return on entrepreneur's own investment
Salary of the proprietor (correct)
Prices of materials

What is the formula for calculating economic profit?

Explicit Cost + Implicit Cost
Total Revenue - Accounting Cost
Total Revenue - Economic Cost (correct)
Accounting Profit - Implicit Cost

Which of the following is an example of a short run?

<p>That period of time during which at least one factor of production must remain fixed, e.g. capital (C)</p> Signup and view all the answers

What is the difference between short run and long run?

<p>Short run is a period of time in which it is possible to vary output by varying all factors of production within the given state of technology, while long run is a period of time during which factors of production can be varied to the fullest extent (C)</p> Signup and view all the answers

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