Question

1A)

The difference between a firm's total revenues and total costs when all explicit and implicit costs are included is the firm's:

	a.	opportunity cost of capital.
	b.	accounting profit.
	c.	economic profit.
	d.	long-run average total cost.

1B)

The average fixed cost of a firm equal:

	a.	implicit costs divided by output.
	b.	total cost minus variable cost.
	c.	explicit costs divided by output.
	d.	total cost minus total variable cost divided by output.

Answer 1

Q1A)
Option c
Economic profit
An economic profit =total revenue -explicit costs-implicit costs
so the difference is an economic profit.
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Q1B)
option d
total cost minus total variable cost divided by output.
Average fixed cost =fixed cost/quantity
fixed cost =total cost -total variable cost
so
AVC=(TC-TVC)/Q