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Question
Microeconomics
Posted 9 months ago
All of the following are included in the calculation of accounting profit EXCEPT which of option?
Choose 1 answer:
A) total revenue
(B) explicit costs
(C) fixed costs
(D) implicit costs
(E) variable costs
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Answer from Sia
Posted 9 months ago
Solution
a
Definition of Accounting Profit: Accounting profit is calculated as total revenue minus explicit costs
b
Explicit Costs: These are direct, out-of-pocket payments for costs such as wages, rent, and materials
c
Implicit Costs: These are opportunity costs of using resources owned by the firm, such as the owner's time or capital
d
Fixed Costs: These are costs that do not change with the level of output, such as rent or salaries
e
Variable Costs: These are costs that vary with the level of output, such as raw materials
Answer
(D) implicit costs
Key Concept
Implicit costs are not included in the calculation of accounting profit.
Explanation
Accounting profit only considers explicit costs, which are direct, out-of-pocket expenses. Implicit costs, which are opportunity costs, are not included in this calculation.
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