Asked by Samantha Adams on Apr 29, 2024
Verified
A firm's opportunity costs of production are equal to its
A) explicit costs only.
B) implicit costs only.
C) explicit costs + implicit costs.
D) explicit costs + implicit costs + total revenue.
Implicit Costs
Implicit costs are the opportunity costs of using resources owned by the firm for its own use instead of other purposes.
Explicit Costs
Money paid out to different parties during the operation of a business, covering expenses like employee salaries, leasing costs, and material purchases.
Opportunity Costs
The value of the next best alternative forgone as a result of making a particular choice.
- Understand the concept of opportunity costs and how they are composed of both explicit and implicit costs.
Verified Answer
SG
Sarvjeet GhotraMay 02, 2024
Final Answer :
C
Explanation :
Opportunity costs of production include both explicit costs (direct, out-of-pocket payments) and implicit costs (the value of resources used in production for which no direct payment is made).
Learning Objectives
- Understand the concept of opportunity costs and how they are composed of both explicit and implicit costs.