Question

To the economist total cost includes:

a. explicit and implicit costs, including a mummal profit
b. neither impliciter explicit costs.
c. implicit, but not explicit costs
d. explicit, but not implicit costs

Answer 1

Total cost in economics refers to the sum of both explicit costs, such as wages and rent, and implicit costs, which include opportunity costs like an owner's unpaid labor, depreciation, and sacrificed leisure time.

Step-by-step explanation:

According to economic theory, total cost includes both explicit and implicit costs. Explicit costs consist of out-of-pocket costs, such as wages and rent, which are actual payments made by a firm. Implicit costs, on the other hand, represent the opportunity cost of utilizing resources the firm already owns but doesn't necessarily make a direct payment for.

Examples of implicit costs include an owner's time spent working in the business without a formal salary, the use of a home's ground floor as a retail space, depreciation of goods, materials, and equipment, as well as any foregone leisure time that is sacrificed in order to operate the business.