Asked by
Brian Kirksey
on Nov 25, 2024
Verified
Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?
A) payments of wages to its office workers
B) rent paid for the use of equipment owned by the Schultz Machinery Company
C) use of savings to pay operating expenses instead of generating interest income
D) economic profits resulting from current production
Implicit Cost
The opportunity cost of using resources already owned by the firm for its current purpose, rather than their next best alternative use.
Economic Profits
The surplus remaining after total costs (both explicit and implicit) are subtracted from total revenues, often indicating the financial health and efficiency of a company.
- Differentiate between implicit costs and opportunity costs.
- Distinguish between explicit and implicit costs, including economic and accounting profits.
Verified Answer
NA
Learning Objectives
- Differentiate between implicit costs and opportunity costs.
- Distinguish between explicit and implicit costs, including economic and accounting profits.