Economic Costs and Profits

These flashcards cover key concepts related to economic costs and profits, including definitions and formulas essential for understanding the differences between accounting and economic profit.

Economic costs include both and costs.

explicit and implicit costs.

A firm's explicit costs are the __ payments it makes to purchase resources from others.

monetary

Implicit costs refer to the opportunity costs of using resources that the firm __ owns.

already

The formula for economic costs is __ = Explicit costs + Implicit costs.

Economic costs

Accounting profit is calculated by subtracting only __ costs from revenue.

explicit

Economic profit accounts for both explicit costs and __ costs.

implicit

If the accounting profit is $57,000 and the total implicit costs are $33,000, then the economic profit is __.

$24,000

The basic organizational structure of a business involves using resources and providing __ ability.

entrepreneurial

When a firm is breaking even, it is earning exactly $0 of __ profit.

economic

Economic profits lead resources to flow from lower net benefit productions to __ benefit productions.

higher