Asked by Ahmed Aldughaither on Jul 28, 2024
Verified
Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's
A) total revenue.
B) explicit costs.
C) implicit costs.
D) marginal costs.
Explicit Costs
Direct, out-of-pocket expenses incurred in conducting an activity or business operation.
Implicit Costs
Costs that represent the opportunity costs of using resources that the firm already owns, not involving direct monetary payment.
Economic Profit
The difference between total revenues and total costs, including both explicit and implicit costs, indicating the financial gain in an economic activity.
- Compare and contrast explicit and implicit costs, recognizing their relevance to economic and accounting profits.
- Acquire an understanding of opportunity costs and their significance in the decision-making framework.
Verified Answer
JB
JUSTIN BRANCHJul 29, 2024
Final Answer :
C
Explanation :
The $5,000 that Bubba gave up by not working as a fishing tour guide is considered an opportunity cost of running his shrimp business. In economic terms, this is counted as part of the business's implicit costs, which are the costs associated with the entrepreneur's resources used in the business.
Learning Objectives
- Compare and contrast explicit and implicit costs, recognizing their relevance to economic and accounting profits.
- Acquire an understanding of opportunity costs and their significance in the decision-making framework.