John Moved His Office from a Building He Was Renting

question 184

Multiple Choice

John moved his office from a building he was renting downtown to the carriage house he owns behind his house.How will his profit change?

• A)Implicit costs will fall.
• B)Explicit costs will remain unchanged, while implicit costs will rise.
• C)Economic profit will fall.
• D)Explicit costs will rise.
• E)Accounting profit will rise.

---

Definitions:

Variance

A statistical measure that indicates the spread of data points in a dataset around the mean, reflecting the data's volatility.

Risk Averse

The tendency to prefer certainty over risk, where an individual opts for the investment with the least potential for financial loss.

NPV

A financial metric that calculates the total value of a project or investment by discounting future cash flows back to their present value and subtracting initial investment cost.

Scenario Analysis

A business planning technique in which the implications of variations in planning assumptions are explored. Also known as “what-if-ing.”