Suppose That a Business Incurred Implicit Costs of $500,000 and Explicit

question 118

Multiple Choice

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting

• A) profits were $100,000 and its economic profits were $0.
• B) losses were $500,000 and its economic losses were $0.
• C) profits were $500,000 and its economic profits were $1 million.
• D) profits were $0 and its economic losses were $500,000.

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Definitions:

Decision

The process of making choices among alternative courses of action.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future business decisions.

Future Costs

Costs that will be incurred in the future, impacting decisions on investments, production, and other business activities.

Relevant

Relates to or directly impacts the subject under discussion.