Asked by Stephen Schoenfeld on Jul 04, 2024
Verified
Normal profit is an implicit cost.
Normal Profit
The payment made by a firm to obtain and retain entrepreneurial ability; the minimum income that entrepreneurial ability must receive to induce entrepreneurs to provide their entrepreneurial ability to a firm; the level of accounting profit at which a firm generates an economic profit of zero after paying for entrepreneurial ability.
Implicit Cost
The monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market; equal to what the resource could have earned in the best-paying alternative employment; includes a normal profit.
- Absorb the knowledge regarding how explicit costs, implicit costs, and normal profit differ.
Verified Answer
MR
Melissa RamosJul 05, 2024
Final Answer :
True
Explanation :
Normal profit is considered an implicit cost because it represents the opportunity cost of the capital employed in the business, or the income the entrepreneur could have earned by using their resources in the next best alternative.
Learning Objectives
- Absorb the knowledge regarding how explicit costs, implicit costs, and normal profit differ.