Asked by Reuben Acosta on Apr 24, 2024
Verified
Economic cost can best be defined as
A) any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers.
B) any contractual obligation to labor or material suppliers.
C) a payment that must be made to obtain and retain the services of a resource.
D) all costs exclusive of payments to fixed factors of production.
Economic Cost
A payment that must be made to obtain and retain the services of a resource; the income a firm must provide to a resource supplier to attract the resource away from an alternative use; equal to the quantity of other products that cannot be produced when resources are instead used to make a particular product.
- Unravel the distinctions between explicit and implicit costs, alongside the divergence between economic and accounting profits.
Verified Answer
MM
Muqueet Mohsen Chowdhury8 days ago
Final Answer :
C
Explanation :
Economic cost includes both the explicit costs of payments made to resource suppliers and the implicit costs related to the opportunity cost of using resources in one way instead of another. Choice C best captures this by emphasizing the necessity of payments to obtain and retain resources, implicitly including both explicit and implicit costs.
Learning Objectives
- Unravel the distinctions between explicit and implicit costs, alongside the divergence between economic and accounting profits.