The difference between the economic and accounting costs of a firm are:
A) the accountant's fees.
B) the corporate taxes on profits .
C) the opportunity costs of the factors of production that the firm owns.
D) the sunk costs incurred by the firm.
E) the explicit costs of the firm.

Question

Quizplus · Accepted Answer

The economic costs of a firm include both explicit (accounting) costs and implicit (opportunity) costs. Accounting costs refer to the actual expenses a company incurs from the use of resources such as wages, rent, materials, and other direct and indirect costs. Economic costs, on the other hand, take into account the opportunity costs of using resources. This means including the value of resources such as time, foregone earning opportunities, and other factors of production that the firm owns, without necessarily being reflected in the accounting statements. Hence, the correct answer is C.

The Difference Between the Economic and Accounting Costs of a Firm