Implicit cost is equal to
A) business profit minus economic profit.
B) business profit plus economic profit.
C) economic profit minus business profit.
D) economic profit minus explicit cost.

Question

Quizplus · Accepted Answer

Implicit cost is the opportunity cost equal to what a firm must give up in order to use resources that it already owns. It is not directly reflected in cash flow and is considered an opportunity cost. Economic profit is calculated by subtracting both explicit (direct monetary payments) and implicit costs from total revenue, whereas business (or accounting) profit subtracts only explicit costs from total revenue. Therefore, implicit cost can be found by subtracting economic profit from business profit, as economic profit accounts for both explicit and implicit costs, while business profit accounts only for explicit costs.

Implicit Cost Is Equal to