If the Owners of a Firm Earn Accounting Profit, It

question 21

Multiple Choice

If the owners of a firm earn accounting profit, it follows that

• A)they will earn economic profit, too.
• B)their explicit costs are greater than their implicit costs.
• C)their implicit costs are greater than their explicit costs.
• D)they will not earn economic profit.
• E)none of the above

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Definitions:

Period Costs

Expenses that are not directly tied to the production process and are instead incurred over a specific time period, such as selling, general, and administrative expenses.

Operating Costs

Expenses associated with running a business on a day-to-day basis, such as rent, utilities, and payroll, excluding costs associated with producing goods.

Factory Overhead

Encompasses all indirect costs involved in manufacturing, excluding direct materials and direct labor, such as utilities and rent for the manufacturing space.

Labor Costs

Expenses incurred by companies for the wages, salaries, and benefits paid to their employees.