The economic costs of production _____________.

includes the explicit cost of inputs plus the opportunity cost of the highest valued income or investment opportunities that are foregone.

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includes the cost of fixed and variable production inputs.

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includes the explicit cost of inputs plus the sunk costs of assets for which there are no alternative uses.

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excludes the explicit cost of inputs but includes the opportunity costs of the highest valued income or investment opportunities that are foregone.

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Solution

The correct option is A includes the explicit cost of inputs plus the opportunity cost of the highest valued income or investment opportunities that are foregone.
Economic cost is the summation of explicit as well as implicit cost. Implicit cost refers to the opportunity cost of the highest valued income or investment opportunities that are foregone. Thus, the economic cost of production includes the explicit cost of inputs plus the opportunity cost of the highest valued income or investment opportunities that are foregone.

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Similar questions

Which of the following statements about opportunity cost is TRUE?

I. Opportunity cost is equal to implicit costs plus explicit costs.
II. Opportunity cost only measures direct monetary costs.
III. Opportunity cost accounts for alternative uses of resources such as time and money.

Q. The profit level that is just enough to cover the explicit costs and opportunity costs of the firm is called the _______

Q. Opportunity costs are a result of __________.

Q. The opportunity cost of a factor of production is ___________.

Q. Opportunity cost of production of a commodity is ________.

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