Part 1Why is normal profit an opportunity cost? Part 1Normal profit is _______. Normal profit is part of a firm's opportunity cost because _______. A. the profit used by the IRS to calculate tax owing;it is paid in cash B. the profit used by the IRS to calculate tax owing;part of it must be paid to the government and is no longer available to the entrepreneur C. the return that an entrepreneur can expect to receive on the average;it is not paid in cash D. the return that an entrepreneur can expect to receive on the average;it is the cost of a forgone alternative, which is running another firm

Question

Part 1Why is normal profit an opportunity​ cost? Part 1Normal profit is​ _______. Normal profit is part of a​ firm's opportunity cost because​ _______. A. the profit used by the IRS to calculate tax​ owing;it is paid in cash B. the profit used by the IRS to calculate tax​ owing;part of it must be paid to the government and is no longer available to the entrepreneur C. the return that an entrepreneur can expect to receive on the​ average;it is not paid in cash D. the return that an entrepreneur can expect to receive on the​ average;it is the cost of a forgone​ alternative, which is running another firm

BlackTom AI · Accepted Answer

The question asks why normal profit is considered an opportunity cost and provides four answer choices. 
Option A: 'A. the profit used by the IRS to calculate tax owing; it is paid in cash.' This is incorrect because normal profit is not defined by tax computations or cash payments to the IRS, and it mischaracterizes normal profit as a tax-related cash outlay rather than an implicit opportunity cost. 
Option B: 'B. the profit used by the IRS to calculate tax owing; part of it must be paid to the government and is no longer available to the entrepreneur.' While taxes reduce cash, normal profit is not primarily about tax liability; opportunity cost concerns foregone alternatives rather than tax flows, so this framing is misleading. 
Option C: 'C. the return that an entrepreneur can expect to receive on the average; it is not paid in cash.' This treats normal profit as a typical expected cash return, which ignores the crucial idea that it embodies the foregone return from the best alternative use of resources; also, normal profit is indeed an opportunity cost calculation, not simply a non-cash average return. 
Option D: 'D. the return that an entrepreneur can expect to receive on the average; it is the cost of a forgone alternative, which is running another firm.' This correctly captures the concept: normal profit represents the expected return from the next-best alternative use of resources (e.g., running another firm), and as such is an opportunity cost embedded in decision making. It aligns with standard economic definitions where normal profit equals the minimum level of profit needed to keep resources employed in their current use, reflecting the forgone alternative. 
Putting it together, the key distinction is that normal profit is not about taxes or cash payments, nor merely an average non-cash return; it is the forgone return from the best alternative use of resources, which is exactly the notion of an opportunity cost. The other options fail to frame normal profit as the cost of sacrificing the next-best alternative, or they confuse it with tax mechanics or non-cash averaging. 
Therefore, option D is the correct interpretation of normal profit as an opportunity cost, while A, B, and C each contain a mischaracterization of what normal profit represents in economic theory.

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