A Firm Has Explicit Costs of $110,000 and Total Revenue

question 106

Multiple Choice

A firm has explicit costs of $110,000 and total revenue of $120,000. Which of the following is true about the firm?

• A) The firm might be making an economic profit but we need more information about implicit costs to know for sure.
• B) The firm is incurring an economic loss if implicit costs are $10,000.
• C) The firm is definitely making an economic profit because it must be minimising its opportunity cost.
• D) The firm is making a normal profit if implicit costs are $0.
• E) The firm may be making an economic profit but only if implicit costs are negative.

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Definitions:

Maximize Profits

The process or strategy of adjusting production or operations to generate the highest possible financial gain.

Task Performance

The execution and completion of specific tasks or duties as part of one's role or job responsibilities.

Teamwork

The collaborative effort of a group to achieve common goals or complete tasks in the most effective and efficient way.

Life Cycle

The series of stages through which something (such as a product, organization, or project) passes during its lifetime.