TutorOn by Sanath Withanage

Question:

Which of the following statements is correct?
(1) Economic profit = accounting profit
(2) Economic cost = explicit cost + implicit cost
(3) Economic cost = explicit cost – implicit cost
(4) Opportunity cost = economic profit
(5) Accounting cost = implicit cost

Correct Answer:

(2)

Answer Explanation:

In economic theory, the true cost of production encompasses both explicit costs (actual out-of-pocket payments like wages and rent) and implicit costs (the opportunity cost of utilizing the firm’s self-owned resources, such as the owner’s forgone salary).

Topic: Costs of Production Year: 2020