Which of the following is an example of an implicit cost a firm might incur?
A) the wages paid to employees
B) the payment for medical insurance coverage
C) the opportunity cost to investors of the funds invested in the firm
D) utility payments
Answer: C
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Neither the demand nor the supply of automobiles is perfectly elastic or inelastic. If the government imposes a $1,000 tax on automobiles, then the price of an automobile buyers pay
A) increases by $1,000. B) increases by less than $1,000. C) increases by more than $1,000. D) decreases by $1,000. E) does not change.
Consider a housing development built near an existing airport. After the houses are occupied, homeowners complain that the airport imposes a negative externality on them and it should be moved or otherwise limited. Is the airport a negative externality?
A) No, the airport was there first. B) No, if the original property values reflect the costs imposed by the airport. C) No, airports are government entities and therefore don't impose costs on individuals. D) Yes, the airport's noise should be curtailed for the well-being of the homeowners.