The correct answer is: A. implicit cost.
Normal profit is the minimum amount of profit that a firm must earn in order to remain in business. It is the amount of profit that a firm would earn if it were to produce its output at the lowest possible cost. Normal profit is not included in the firm’s explicit costs, which are the costs that the firm incurs in order to produce its output. Explicit costs include the costs of labor, materials, and capital. Normal profit is included in the firm’s implicit costs, which are the costs that the firm incurs in order to use its resources. Implicit costs include the opportunity cost of the firm’s resources, which is the amount of profit that the firm could earn if it were to use its resources in another way.
Implicit costs are not included in the firm’s accounting profit, which is the firm’s total revenue minus its explicit costs. However, implicit costs are included in the firm’s economic profit, which is the firm’s total revenue minus its total costs, both explicit and implicit.
Here is a brief explanation of each option:
- Implicit cost: Implicit costs are the costs that a firm incurs in order to use its resources. Implicit costs include the opportunity cost of the firm’s resources, which is the amount of profit that the firm could earn if it were to use its resources in another way.
- Explicit cost: Explicit costs are the costs that the firm incurs in order to produce its output. Explicit costs include the costs of labor, materials, and capital.
- Real cost: Real cost is the cost of a good or service in terms of the goods and services that must be given up in order to obtain it.
- Opportunity cost: Opportunity cost is the cost of a good or service in terms of the next best alternative that must be forgone in order to obtain it.