Asked by Britanny Espinosa on May 14, 2024
Verified
The Oh So Humble Bakery sells 300 muffins at a price of $1 per muffin. Its explicit costs for producing 300 muffins are $250. If the bakery is earning a normal rate of return, then implicit costs must be
A) $50.
B) $100.
C) $250.
D) $350.
Implicit Costs
These are the costs of using resources owned by the company for production that aren't directly paid for or incurred as a clear expense.
Explicit Costs
Direct payments made to others in the course of running a business, such as wages, rent, and materials.
Normal Rate
The normal rate often refers to a baseline or average level of interest or return expected on an investment or loan in economics and finance.
- Apprehend the theory of economic charges, including explicit and implicit costs.
- Pinpoint the normal rate of return and its criticality in the assessment of economic profit calculations.
Verified Answer
AA
Abhinav AnandMay 17, 2024
Final Answer :
A
Explanation :
Implicit costs are $50 because the bakery's total revenue ($300 from selling 300 muffins at $1 each) minus explicit costs ($250) equals $50, which represents the normal rate of return (implicit costs).
Learning Objectives
- Apprehend the theory of economic charges, including explicit and implicit costs.
- Pinpoint the normal rate of return and its criticality in the assessment of economic profit calculations.