When calculating a firm's profit, an economist will subtract only
A)explicit costs from total revenue because these are the only costs that can be measured explicitly.
B)implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured.
C)the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm.
D)the marginal cost because the cost of the next unit is the only relevant cost.

Question

Quizplus · Accepted Answer

Economists subtract the opportunity costs, which include both the implicit and explicit costs of the firm, from total revenue to calculate profit. This is necessary to accurately reflect the true cost of resources used by the firm, including the foregone opportunities associated with using those resources in a different way.

When Calculating a Firm's Profit, an Economist Will Subtract Only