Question

Which of the following are true regarding profits, revenues, and costs? Choose one or more: A. total costs = implicit costs + explicit costs B. revenue = (price x quantity) – total costs C. profit = total revenue – total costs D. accounting profit = revenue – implicit costs E. economic profit = accounting profit – implicit costs F. revenue = price x quantity G. economic profit = revenue – implicit costs

Answer 1

Answer:

A. total costs = implicit costs + explicit costs

C. profit = total revenue – total costs

E. economic profit = accounting profit – implicit costs

F. revenue = price x quantity

G.economic profit = revenue – implicit costs

Explanation:

Implicit costs are opportunity cost.

Explicit cost are the actual cost incured in carrying out an activity.

For example, if I decide to start up a delivery business, I would be leaving a job that pays $500. The cost to buy bicycles are $300. I make 10 deliveries and earn $1000.

My implicit cost is $500. It is what I would have been earning if I didn't start my business.

My explicit Cost is $300 which is the cost of acquiring bicycles.

Revenue = price of a good × quantity sold

Accounting profit = Revenue - Explicit cost. In the above example, my accounting profit is $1000 - $300 = $700

Economic profit = Accounting profit - implicit cost

In the above example, my economic profit is $700 - $500 = $200

I hope my answer helps you