Question

A firm's opportunity costs of production are equal to its a. explicit costs only. b. implicit costs only. c. explicit costs implicit costs total revenue. d. explicit costs implicit costs.

Answer 1

A firm's opportunity costs of production are equal to its implicit costs only.

What is opportunity cost?

Opportunity cost is an economic term for expressing cost in terms of foregone alternative. It is the loss of potential gain from other alternatives when one alternative is chosen.

Implicit cost is the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent.

Hence, a firm's opportunity costs of production are equal to its implicit costs only.

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