Home › CA Foundation › Business Economics › Price-Output Determination under Different Market Forms › A firm invests ₹ 50,000 of its own capital when …
A firm invests ₹ 50,000 of its own capital when the normal market return is 10 percent. If its explicit cost of producing 1,000 units is ₹ 15,000, what is its total economic cost?
A₹ 5,000
B₹ 15,000
C₹ 20,000
D₹ 65,000
Answer & Solution
Correct answer: C. ₹ 20,000
1. Total economic cost equals explicit cost plus implicit cost.
2. Implicit cost is the forgone normal return on own capital = 10% of ₹ 50,000 = ₹ 5,000.
3. Explicit cost is given as ₹ 15,000.
4. Total economic cost = 15,000 + 5,000 = ₹ 20,000.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit III "Price-Output Determination under Different Market Forms", p.5_
Related questions
A firm is currently at an output where MR > MC. To maximise profit, the firm should:When a dominant low-cost firm sets the price and the smaller fringe firms simply accept anA market structure in which there is a single buyer of a product or factor service is knowA group of firms that explicitly agree to coordinate price and output to act jointly like Under the kinked demand curve model, the segment of the demand curve above the prevailing The kinked demand curve hypothesis, proposed by Paul Sweezy, is mainly used to explain:The single most important feature that distinguishes oligopoly from other market forms is:Under monopolistic competition, firms compete largely through non-price methods. The main