Reading 16: Organizing Production-LOS a 习题精选 2011, completely, describes, following, economic

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Session 4: Economics: Microeconomic Analysis
Reading 16: Organizing Production

LOS a: Explain the types of opportunity cost and their relation to economic profit, and calculate economic profit.

 

 

Which of the following most completely describes opportunity costs?

A) Opportunity costs include only implicit costs.

B) Opportunity costs include implicit and explicit costs.

C) Opportunity costs include only explicit costs.

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Opportunity costs include implicit and explicit costs. Normal profit is the opportunity cost of owners’ time, resources, and expertise.

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Which of the following most accurately describes economic profit? Economic profits are zero when:

A) implied rental rates equal forgone interest.

B) total revenue equals the sum of all opportunity costs.

C) implicit costs equal explicit costs.

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Economic profit are zero when total revenues are just equal to the sum of all opportunity costs, which includes all implicit and explicit costs.

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Assume that a firm used $60 million in labor and materials to generate $100 million in total revenues. Other costs included $200,000 in foregone interest, economic depreciation of $40,000, and normal profit of $130,000. The economic profit to this firm is closest to:

A) $39,712,000.

B) $40,000,000.

C) $39,630,000.

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Economic profit = total revenue – opportunity costs = total revenue – (explicit + implicit costs). In this case, the labor and material cost of $60 million is the explicit cost. Implicit costs include the $200,000 in foregone interest, economic depreciation of $40,000, and normal profit of $130,000. So, total implicit costs equal $370,000 = $200,000 + $40,000 + $130,000. Thus, economic profit is $100,000,000 - $60,000,000 - $370,000 = $39,630,000.

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Which of the following is an example of an implicit cost?

A) Labor salaries.

B) The opportunity cost of a firm's equity capital.

C) Rent.

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Implicit costs include the opportunity cost of a firm's equity. Explicit costs are measurable cash flows for operating expenses.

luqian55

thanks a lot