B2.01.05: Economic costs and Types of Cost

Question 1

Define implied imputed costs

Answer 1

The value of benefits or opportunities that are given up when using a resource in a particular way, even if no actual payment or explicit cost is involved.

Question 2

Define explicit costs

Answer 2

Payments made by firms for the FOP they use/employ

Question 3

Define economic costs

Answer 3

The economic cost of producing a good is the opportunity cost of the firm’s production

Question 4

Define economic profits

Answer 4

Differences between TR and TC incurred in production

Question 5

Define explicit costs

Answer 5

Costs to a firm that involve the direct payment of money

Question 6

Define implicit costs

Answer 6

The profit a business could’ve made doing their next best alternative

Question 7

Formula for TFC

Answer 7

TFC : TC - TVC
TFC : AFC x Q

Question 8

Formula for AFC

Answer 8

AFC : TFC / Q
AFC : AC - AVC

Question 9

Formula for AVC

Answer 9

AVC : VC / Q

Question 10

Formula for Average Costs

Answer 10

AC : TC / Q

Question 11

Examples of imputed costs

Answer 11

• Financial Capital
• Depreciation
• Goodwill
• Labour

Question 12

Define Marginal Costs

Answer 12

The additional to total cost of one extra unit of output (delta TC / delta Q)

Question 13

Define Marginal Revenue

Answer 13

The increase in total revenue resulting from an extra unit of sales (delta TR / delta Q)