The total cost of the firm
A) includes explicit costs but excludes implicit costs.
B) includes implicit costs but excludes explicit costs.
C) includes implicit and explicit costs.
D) includes implicit and explicit costs but excludes a normal rate of return on investment.

Question

Quizplus · Accepted Answer

The total cost of a firm includes both implicit and explicit costs. Explicit costs are expenses that require direct payment, such as wages, utilities, and materials. Implicit costs, on the other hand, represent the opportunity cost of using resources owned by the firm, including foregone profits, owner labor, or the use of capital. Therefore, the total cost of the firm includes both types of costs.

The Total Cost of the Firm