A firm pays $50,000 for a machine that is used in production for one year,after which it is sold for $40,000 to another firm.The $10,000 difference is
A) an explicit cost of production.
B) economic depreciation, an implicit cost of production.
C) normal profit.
D) not counted as an economic cost of production.
E) not an opportunity cost because it is not actually paid.

Question

Quizplus · Accepted Answer

The $10,000 difference between the purchase price and the sale price of the machine is the economic depreciation or implicit cost of production. This is because the machine has lost value over time due to wear and tear during its use in production. This cost is not an explicit cost, as it is not a direct out-of-pocket expense, but it is still an important cost to consider in determining the true cost of using the machine in production.

A Firm Pays $50,000 for a Machine That Is Used