- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 2. Economic Profit vs. Accounting Profit
CFA Practice Question
Which of the following does NOT represent a firm's explicit costs?
II. The amount paid by the firm for employee health benefits
III. The firm's total accounting costs
IV. The value of the CEO's time
V. The electricity bill
I. Costs related to workers salaries
II. The amount paid by the firm for employee health benefits
III. The firm's total accounting costs
IV. The value of the CEO's time
V. The electricity bill
Correct Answer: IV only
The CEO is paid for the value of his/her work, not the value of his/her time. This time is an implicit cost.
User Contributed Comments 2
| User | Comment |
|---|---|
| sergashev | shouldn't he/she be owner with CEO role, if CEO is hired, firm does not have to consider CEO's personal opportunity cost ? |
| mordja | Fair observation sergashev. I think from the options though we can logically assume the CEO has an ownership interest as the others are quite obviously explicit. |