Ch. 13 Critical Thinking.docx

Ch. 13 Critical Thinking.docx - Ch 13 Critical Thinking 1...

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Ch. 13 Critical Thinking 1. Explain the difference between explicit costs and implicit costs. Explicit costs are expenses that require payment to be made (for example rent, payroll, etc.) Implicit costs are implied costs where you don’t pay in cash and it’s not recorded in the company’s books (for example intangible costs). 2. Explain the difference between economic profit and accounting profit. Accounting Profit studies actual gains and losses within the company. This includes a total of all of the company’s revenue minus cash received as payment for purchases or explicit costs. In contrast to accounting profit, economic profit thinks about the cost of a company’s resources that are being used when producing their goods and/or services (implicit resources which can be equipment, company-owned vehicles, etc.). 3. What are the 2 variables that the Production Function is analyzing/graphing? Why does the production function diminish over time?
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