A firm has explicit costs of $110,000 and total revenue of $120,000.Which of the following is true about the firm?
A) The firm might be making an economic profit but we need more information about implicit costs to know for sure.
B) The firm is definitely making an economic profit because it must be minimizing its opportunity cost.
C) The firm is incurring an economic loss if implicit costs are $10,000.
D) The firm is making a normal profit if implicit costs are $0.
E) The firm may be making an economic profit but only if implicit costs are negative.

Question

Quizplus · Accepted Answer

We only have information about explicit costs and not implicit costs. Therefore, we cannot determine if the firm is making an economic profit or loss without knowing the total opportunity cost of running the business, which includes both explicit and implicit costs.

A Firm Has Explicit Costs of $110,000 and Total Revenue