Daisy Plant owns and operates Rosey's Poseys, a new flower shop. Ms. Plant's accountant has calculated that her costs this past year totaled $140,000 and that her revenue was $200,000, giving her a profit of $60,000. Ms. Plant's economist friend said that her profit was not really $60,000, but that she had a loss of $10,000. Ms. Plant's economist friend:
A) figured implicit costs to be $70,000.
B) included all costs necessary to keep production going.
C) calculated the economic cost of production in determining Ms. Plant's profit condition.
D) all of the above.

Question

Quizplus · Accepted Answer

The economist friend considered implicit costs, which are not out-of-pocket costs but represent the opportunity costs of using resources in a particular way instead of the next best alternative. By including these costs, the friend calculated the economic cost of production, which led to the conclusion that Ms. Plant had a loss, indicating that all the options provided are correct in explaining the economist's reasoning.

Daisy Plant Owns and Operates Rosey's Poseys, a New Flower