When an economist uses the term 'cost' referring to a firm, the economist refers to the
A) implicit cost of producing a good or service, but not the explicit cost of producing a good or service.
B) explicit cost of producing a good or service, but not the implicit cost of producing a good or service.
C) opportunity cost of producing a good or service, which includes both implicit and explicit cost.
D) price of the good to the consumer.
E) cost that can be actually verified and measured.

Question

Quizplus · Accepted Answer

When economists use the term 'cost' in reference to a firm, they are referring to the opportunity cost of producing a good or service, which includes both implicit and explicit cost. Implicit cost refers to the opportunity cost of using a firm's resources that have alternative uses, while explicit cost refers to the actual monetary payments made for resources used in production. Therefore, the correct answer is C.

When an Economist Uses the Term 'Cost' Referring to a Firm