Which of the following statements is TRUE?
A) Accounting profit is usually smaller than economic profit.
B) Unlike implicit costs, explicit costs require monetary outlays.
C) Knowledge about explicit costs is more useful for making business decisions than knowledge about implicit costs.
D) Implicit costs equal explicit costs for for-profit firms.

Question

Quizplus · Accepted Answer

Explicit costs are those that require a monetary payment, such as wages or rent. Implicit costs, on the other hand, represent the opportunity cost of using resources that have no direct payment, such as the opportunity cost of the owner's time or the use of a self-owned property. It is true that accounting profit is usually smaller than economic profit, but it is not the case that implicit costs equal explicit costs for for-profit firms. Additionally, knowledge about implicit costs is also critical for making business decisions, as it helps to understand the full economic cost of a decision.

Which of the Following Statements Is TRUE