A Firm Pays $50,000 for a Machine That Is Used

question 171

Multiple Choice

A firm pays $50,000 for a machine that is used in production for one year,after which it is sold for $40,000 to another firm.The $10,000 difference is

• A) an explicit cost of production.
• B) economic depreciation, an implicit cost of production.
• C) normal profit.
• D) not counted as an economic cost of production.
• E) not an opportunity cost because it is not actually paid.

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Definitions:

Maximizing

The strategy of seeking the best possible option or outcome among a set of choices, aiming for the highest utility or benefit.

Heuristic

A problem-solving approach using practical methods or shortcuts to generate satisfactory, but not necessarily optimal, solutions.

Prospect Theory

A behavioral economic theory that describes how people choose between probabilistic alternatives that involve risk.

Reference Point

A basis or standard for evaluation, assessment, or comparison; a point of reference.