Question

Which of the following is true of economic costs?

A) They include only explicit costs.
B) They include both explicit and implicit costs.
C) They are always equal to accounting costs.
D) They exclude opportunity costs.

Answer 1

Economic costs include both explicit and implicit costs. Explicit costs are out-of-pocket costs, while implicit costs represent the opportunity cost of using resources already owned by the firm. Economic costs are different from accounting costs because they consider both explicit and implicit costs.

Step-by-step explanation:

Economic costs include both explicit and implicit costs.

Explicit costs are the out-of-pocket costs that a business has to pay, such as wages and rent. Implicit costs, on the other hand, represent the opportunity cost of using resources that are already owned by the firm, including the owner's time and the depreciation of goods and equipment.

Economic costs are different from accounting costs, which only include explicit costs. Economic costs take into account both explicit and implicit costs, making them a more comprehensive measure of the true cost of production.