John Moved His Office from a Building He Was Renting

question 92

Multiple Choice

John moved his office from a building he was renting downtown to the carriage house he owns in back of his house.How will his profit change?

• A)Implicit costs fall.
• B)Explicit costs remain unchanged while implicit costs rise.
• C)Economic profit must fall.
• D)Explicit costs rise.
• E)Accounting profit will rise.

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Definitions:

Explicit Costs

The direct payment costs to others in the course of running a business or undertaking an economic transaction.

Implicit Costs

Costs that represent forgone opportunities, often not directly outlaid but incurred when resources are used for one purpose over another.

Marginal Cost

captures the cost added by producing one extra item of a product, emphasizing the concept of economies of scale and efficiency in production.

Marginal Product

An increase in output resulting from the use of one more unit of a particular input, holding all other inputs constant.