A Firm Which Earns Normal Profit

question 76

Multiple Choice

A firm which earns normal profit:

• A) is covering all its costs including the opportunity costs of being in business
• B) is covering the opportunity costs of being in business, but not its input costs
• C) is covering the cost of its inputs, but not the opportunity costs of being in business
• D) is covering neither the opportunity costs of being in business nor its input costs

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Definitions:

Conversion Costs

The combined costs of direct labor and overhead expenses incurred to convert raw materials into finished products.

Materials Costs

The cost of raw materials and components required to manufacture a product or deliver a service.

Unit Production Costs

The total cost associated with producing a single unit of a product, including materials, labor, and overhead.

Conversion Cost

The blend of work and indirect expenses used to transform raw materials into completed goods.