3.4

Question 1

Economic Costs

Answer 1

The payment that must be made to obtain and
retain the services of a resource

Question 2

Explicit Costs

Answer 2

Monetary payments, or cash expenditures
* Payments to those who supply labor services, materials, etc.
* Payments for use of resources owned by others

Question 3

Implicit Costs

Answer 3

Opportunity cost of using self-owned, self employed resources
* Money payments that self employed resources could have earned in best alternative use.

Question 4

Normal Profit

Answer 4

The payment made to the entrepreneur for his/her talent or ability and is the amount of money required by the entrepreneur to stay in the market.

Question 5

Accounting Profit

Answer 5

TR = P x Qty
TC = FC + VC
Accounting Profit = TR - Explicit Costs

Question 6

Economic Profit

Answer 6

TC = Explicit Costs + Implicit Costs
TR - Economic Costs= Economic Profit