Which of the following best describes economic costs?

• A. The total revenue received from selling a good or service
• B. The opportunity cost of foregone government subsidies
• C. The sum of explicit and implicit costs incurred in producing a good or service
• D. Only the monetary payments made to purchase inputs for production

Answer: (C)

Verified step by step guidance

1. Understand that economic costs include all costs associated with production, not just the money paid out explicitly.
2. Recall that explicit costs are the direct, out-of-pocket payments for inputs like wages, rent, and materials.
3. Recognize that implicit costs represent the opportunity costs of using resources owned by the firm, such as the owner's time or capital.
4. Combine explicit and implicit costs to get the total economic cost, which reflects the true cost of production including foregone alternatives.
5. Compare the options given and identify that the economic cost is best described as the sum of explicit and implicit costs incurred in producing a good or service.