Final answer:
The statement about Oliver's deductible expenses is false, as the ability to deduct or amortize expenses depends on tax laws and the nature of the costs. The example of Fred's potential legal practice illustrates the importance of considering both explicit and implicit costs when determining economic profitability.
Step-by-step explanation:
The statement regarding whether Oliver can deduct the $63,000 expenses for determining the feasibility of expanding his lawn care service is false. In reality, the treatment of such expenses depends on specific tax rules and the nature of the costs incurred. Generally, if Oliver expands the business, the costs may be deductible as business start-up expenses in the year the business begins. If he chooses not to expand, the expenses may indeed need to be capitalized, but the period of amortization could vary depending on the details of the expenses and tax laws in effect at the time.
Turning to a related concept in business, the difference between accounting profit and economic profit is significant. An example to illustrate this is Fred, who is considering opening his own legal practice. To determine if his practice would be profitable, Fred must consider both explicit costs, such as the office rental of $50,000 and law clerk's salary of $35,000, and implicit costs, like giving up his current job's salary. Economic profitability takes into account both these explicit and implicit costs.