Understanding Explicit and Implicit Costs in Economics Exam Questions Answered Correctly Latest
2025
Explicit Costs - Answers Monetary payments made by individuals, firms, and governments for the use of
land, labor, capital, and entrepreneurial ability owned by others. Also known as accounting costs.
Zero Explicit Costs - Answers A situation where a firm owns the space outright and therefore has no
explicit costs for the space, but still faces opportunity costs.
Opportunity Cost - Answers The value of the next-best foregone alternative.
Implicit Cost - Answers The opportunity costs of using owned resources; costs for which no monetary
payment is explicitly made.
Economic Costs - Answers Explicit + Implicit costs.
Accounting Profit - Answers TR − Explicit Costs.
Economic Profit - Answers TR − Economic Costs.
Economic Profit Formula - Answers TR − (Explicit costs + Implicit costs).
Total Revenue (TR) - Answers The total income generated from sales before any costs are deducted.
Profit Situation - Answers TR = $15,000, Explicit Costs = $12,000, Implicit Costs = $4,000.
Accounting Profit Calculation - Answers Accounting Profit = $15,000 − $12,000 = $3,000.
Economic Profit Calculation - Answers Economic Profit = $15,000 − ($12,000 + $4,000) = −$1,000.
Short Run - Answers The time period in which at least one input of production is fixed but other inputs
can be changed.
Total Product (TP) - Answers The total amount of output produced with a given amount of resources.
Increasing Marginal Returns - Answers A characteristic of production whereby the marginal product of
the next unit of a variable resource utilized is greater than that of the previous variable resource.
Marginal Product Equation - Answers An equation used to calculate the additional output produced by
adding one more unit of labor.
Average Product Equation - Answers An equation used to calculate the output produced per unit of
labor.
Student Challenge 1 - Answers Determine the marginal product and average product when given the
units of labor and the total product.
2025
Explicit Costs - Answers Monetary payments made by individuals, firms, and governments for the use of
land, labor, capital, and entrepreneurial ability owned by others. Also known as accounting costs.
Zero Explicit Costs - Answers A situation where a firm owns the space outright and therefore has no
explicit costs for the space, but still faces opportunity costs.
Opportunity Cost - Answers The value of the next-best foregone alternative.
Implicit Cost - Answers The opportunity costs of using owned resources; costs for which no monetary
payment is explicitly made.
Economic Costs - Answers Explicit + Implicit costs.
Accounting Profit - Answers TR − Explicit Costs.
Economic Profit - Answers TR − Economic Costs.
Economic Profit Formula - Answers TR − (Explicit costs + Implicit costs).
Total Revenue (TR) - Answers The total income generated from sales before any costs are deducted.
Profit Situation - Answers TR = $15,000, Explicit Costs = $12,000, Implicit Costs = $4,000.
Accounting Profit Calculation - Answers Accounting Profit = $15,000 − $12,000 = $3,000.
Economic Profit Calculation - Answers Economic Profit = $15,000 − ($12,000 + $4,000) = −$1,000.
Short Run - Answers The time period in which at least one input of production is fixed but other inputs
can be changed.
Total Product (TP) - Answers The total amount of output produced with a given amount of resources.
Increasing Marginal Returns - Answers A characteristic of production whereby the marginal product of
the next unit of a variable resource utilized is greater than that of the previous variable resource.
Marginal Product Equation - Answers An equation used to calculate the additional output produced by
adding one more unit of labor.
Average Product Equation - Answers An equation used to calculate the output produced per unit of
labor.
Student Challenge 1 - Answers Determine the marginal product and average product when given the
units of labor and the total product.
