A Firm's Total Explicit Costs Are $1,000

question 148

Multiple Choice

A firm's total explicit costs are $1,000. Its total implicit costs are $500, and it has a total revenue of $2000. This firm receives

• A) an accounting profit only.
• B) an economic profit only.
• C) both an economic profit and an accounting profit.
• D) neither an economic profit nor an accounting profit.

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Definitions:

AVC

Average Variable Cost, the cost that varies with the level of output, divided by the quantity of output produced.

Total Fixed Cost

The sum of all costs that do not change with the level of output produced; these costs are incurred even if production is zero.

Marginal Cost

The increase in cost resulting from the production of one additional unit of a good.

Variable Cost

Costs that change in proportion to the level of activity or volume of production in a company.