Which of the Following Would Be Categorized as an Implicit

question 283

Multiple Choice

Which of the following would be categorized as an implicit cost? (i) forgone investment opportunities
(ii) wages of workers
(iii) raw materials costs

• A)(i)
• B)(ii)
• C)(ii) and (iii)
• D)(i) and (iii).

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Definitions:

CAPM

Capital Asset Pricing Model, a formula that describes the relationship between the expected return of an investment and its risk.

Marginal Cost

The cost incurred by producing one additional unit of a product or service, critical for pricing and production decisions.

Retained Earnings

Retained earnings represent the cumulative amount of net income that a company has reinvested in its business rather than distributed to shareholders as dividends.

Common Equity

The amount of capital that belongs to the common shareholders of a company, represented by common stock and retained earnings.