Micro Practice 6, 7, 8

Explicit costs

Are the sum of actual monetary payments made for the use of resources.

Implicit costs

Are the value of resources used for which no direct payment is made.

A firm that makes zero economic profits

Covers all its costs, including a provision for normal profit.

Normal profit

Covers the full opportunity cost of the resources used by the firm.

Accounting costs and economic costs differ because

Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays.

In defining economic costs, economists emphasize...

In defining economic costs, economists emphasize

Greater-than-normal profit represents

Payment for entrepreneurship.

Economists assume the principal motivation of producers is

Profit.

Economic profit is the difference between

Total revenues and total economic costs.