Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
His potential salary from a different job
B
The cost of materials used
C
The wages paid to his employees
D
The rent for his business location
Understanding the Answer
Let's break down why this is correct
Answer
When Raheem evaluates his business decision using accounting profit, he is likely to overlook opportunity costs. Opportunity costs represent the benefits he could have earned from the next best alternative if he had chosen differently. For example, if Raheem invests money into his business instead of using it to buy a new car, the potential enjoyment or income he could have gained from owning that car is an opportunity cost. Accounting profit focuses mainly on explicit costs, like rent and salaries, but it doesn't consider these hidden costs. Therefore, by only looking at accounting profit, Raheem might not see the full picture of his financial situation.
Detailed Explanation
When Raheem looks at accounting profit, he focuses on money coming in and going out. Other options are incorrect because Some might think all costs are ignored, but actual expenses like materials are counted; People may believe that employee wages are not considered, but they are important costs.
Key Concepts
Accounting Profit
Economic Profit
Opportunity Cost
Topic
Accounting vs. Economic Profit
Difficulty
easy level question
Cognitive Level
understand
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