Directions: Please answer each of the following questions in a paragraph for each. Explain your thoughts with theory and examples where applicable.
What are opportunity costs? How do explicit and implicit costs relate to opportunity costs? Opportunity costs is the cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action. Implicit is a cost that is represented by lost opportunity in the use of a company's own resources, excluding cash. These are intangible costs that are not easily accounted for. For example, the time and effort that an owner puts into the maintenance of the company,company rather than working on expansion. Explicit is a business expense that is easily identified and accounted for. Explicit costs represent clear, obvious outflows from a business that reduce its bottom-line profitability. This contrasts with less-tangible expenses such as goodwill amortization, which are not as clear cut regarding their effects on a business's bottom-line value. Good examples of explicit costs would be items such as wage expense, rent or lease costs, and the cost of materials that go into the production of goods. With these expenses, it is easy to see the source of the cash outflow and the business activities to which the expense is attributed. 2.
If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?
List and describe the characteristics of a perfectly competitive market. A perfectly competitive market has the following characteristics.
The market consists of buyers and sellers who are price takers. Each firm in the market produces undifferentiated and homogenous products. Buyers and sellers have perfect information about the price prevailing in the mark. About the availability of commodities...
Please join StudyMode to read the full document