Which of the Following Is an Example of an Implicit

question 29

Multiple Choice

Which of the following is an example of an implicit cost for a firm?

• A)the value of time worked by the owner.
• B)any wages and salaries paid to employed.
• C)forgone rent on property owned by firm.
• D)both a and c
• E)all of the above

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Definitions:

Substitution Effect

The economic principle that as the price of a good or service rises (or incomes decrease), consumers will replace pricier items with less costly alternatives, holding the utility derived from consumption constant.

Price Decreases

Price decreases occur when the cost of goods or services goes down, often due to factors like increased competition, lower demand, or decreases in production costs.

Income Effect

The effect of changes in either individual or economic income on the demand levels for goods or services.

Inferior Good

A type of good whose demand decreases as consumer income rises, meaning it is often replaced by more desirable goods as financial circumstances improve.