If a Firm Has Implicit Costs as Well as Explicit

question 5

Multiple Choice

If a firm has implicit costs as well as explicit costs

• A)net income will always be less than accounting profit.
• B)accounting profit will be zero.
• C)net income will always be greater than accounting profit.
• D)economic profit will be less than accounting profit.

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Definitions:

Incremental Analysis

An examination of the additional benefits and costs of certain business decisions, focusing on the changes from the current state.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, representing the benefits one could have received by choosing a different option.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Direct Labor Efficiency

A measure of the productivity of workers involved directly in manufacturing, calculated as actual hours worked versus standard hours.