Define implicit costs and provide an example that shows why it is important to consider them in a discussion of profit.
What will be an ideal response?
They should make clear that implicit costs are opportunity costs that do not require a monetary payment, but that they still impact whether a business enterprise is worth undertaking. For example, an attorney who opens a private law practice must give up the salary she would be paid in a larger firm. In addition to the salary she gives up when she ceases to be an employee, her implicit costs also include the tax, health, and vacation benefits she forfeits as well as the prestige attached to working for a larger firm. Having her own business must be worth all that she forgoes to make it worth her while.
You might also like to view...
If the exchange rate between the yen and the dollar changed from 100 yen = $1 to 110 yen = $1, then
a. the dollar depreciated b. U.S. goods will become less expensive to the Japanese c. the dollar appreciated d. Japanese goods will become more expensive to U.S. citizens e. the demand for dollars will increase
In the insider-outsider theory:
A. outsiders are workers who retain employment during recession. B. insiders are managers who have more information about their firm's performance than outsiders. C. insiders are "principals" and outsiders are "agents." D. outsiders are laid-off workers and other qualified unemployed workers.