Suppose That During a Given Time Period the Implicit Cost

question 360

Multiple Choice

Suppose that during a given time period the implicit cost for a business was $1,500 and that the explicit cost was $6,000. Also suppose that the firm sold 1,000 units of its products at $7 per item. We can conclude that the firm's

• A) accounting profit was $1,000, and its economic profit was -$500.
• B) accounting and economic profits were both $1000.
• C) accounting profit was -$500, and economic profit was $1,000.
• D) accounting profit was $1000, and economic profit was -$1,500.

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Definitions:

Indirect

Relates to costs or expenses that are not directly tied to a specific product or service but are necessary for the business to operate.

Salespersons' Salaries

Fixed or variable payments made to sales staff, usually composed of a base salary and possibly commissions based on sales performance.

Indirect

Costs that are not directly traceable to a product, activity, or project, often called overhead.

Salespersons

Individuals who sell products or services, often working on commission and focusing on meeting sales targets.