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Microeconomics: Variable, Fixed, Explicit and Implicit costs

A firm's costs can be divided into fixed costs and variable costs. Identify each of the following as either a fixed or variable cost. Then, identify that same costs as being an explicit cost or an implicit cost. Give the rationale for each of your answers.

Labor costs
Materials costs
Entrepreneur's profit
Gasoline used in delivery trucks
Electricity costs

Solution Preview

Labor Costs: Variable and Explicit
These are variable costs as you can decrease or increase your labor as your output decreases or increases. This is also an explicit cost because you can easily measure it through the employee's paychecks or other internal accounting systems.

Material Costs:Variable and Explicit
These are variable costs as you can decrease or increase your material consumption as your output ...

Solution Summary

This solution discusses labor costs, material costs, entrepreneur's profit, gasoline used in delivery trucks and electricity costs in 2-3 sentences each, defining whether they are fixed or variable, and explicit of implicit. This solution is 279 words.

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