Sia
qinyu58530's Question
Microeconomics
Posted 9 months ago
In general, which statements are true?
1 Opportunity costs are greater than accounting costs.
2 Opportunity costs are less than accounting costs.
3 Economic profits are greater than accounting profits.
4 Economic profits are less than accounting profits.
Question 22Select one:
A.
1 and 4
B.
2 and 4
C.
2 and 3
D.
1 and 3
E.
1 only
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Answer from Sia
Posted 9 months ago
Solution
a
Opportunity Costs vs. Accounting Costs: Opportunity costs include both explicit and implicit costs, while accounting costs only include explicit costs. Therefore, opportunity costs are generally greater than accounting costs
b
Economic Profits vs. Accounting Profits: Economic profits are calculated by subtracting both explicit and implicit costs from total revenue, whereas accounting profits only subtract explicit costs. Hence, economic profits are usually less than accounting profits
Answer
A. 1 and 4
Key Concept
Opportunity costs are greater than accounting costs, and economic profits are less than accounting profits.
Explanation
Opportunity costs account for both explicit and implicit costs, making them higher than accounting costs, which only consider explicit costs. Economic profits subtract both types of costs from total revenue, resulting in a lower figure compared to accounting profits, which only subtract explicit costs.
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