Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Implicit costs are ignored in economic profit calculations.
B
Implicit costs can lead to inefficient resource allocation if not considered.
C
Implicit costs are the same as explicit costs.
D
Implicit costs have no effect on business decisions.
Understanding the Answer
Let's break down why this is correct
Answer
Implicit costs are the hidden costs of using resources that could have been used for something else. When a business owner decides to start a company, they might give up a steady job or use their savings, which represents the income they could have earned instead. These costs influence resource allocation because they help determine the true profit of the business. For example, if a person starts a bakery instead of working at a job that pays $50,000 a year, that $50,000 is an implicit cost. By considering implicit costs, businesses can make better decisions about whether to continue or change their activities to maximize their economic profit.
Detailed Explanation
Implicit costs are the hidden costs of using resources. Other options are incorrect because Some people think implicit costs don't matter in profit calculations; This option confuses implicit costs with explicit costs.
Key Concepts
implicit costs
resource allocation
Topic
Understanding Economic Profit
Difficulty
medium level question
Cognitive Level
understand
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