Implicit Costs

question 42

Multiple Choice

Implicit costs

• A) are always fixed.
• B) appear in the calculation of accounting profit.
• C) measure the forgone opportunities of the owners of the business.
• D) always exceed explicit costs.
• E) are irrelevant to business decisions.

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Definitions:

Implicit Costs

Indirect expenses that do not involve a direct cash outlay but represent an opportunity cost, such as using resources for one purpose over another.

Average Product

The output per unit of input, such as the number of goods produced per worker, used to measure productivity efficiency.

Marginal Product

The additional output that is produced by employing one more unit of a factor of production, holding other factors constant.

Total Product

The overall quantity of output that a firm produces, typically over a specific period, given a certain level of input.