Explain the family of short-run cost curves, their shapes and relationships, using a table of your own construction.3.

ConceptMeaningExample (a Kathmandu law practice)Explicit costActual money payments to outsidersoffice rent, clerk's salary, bar-registration feesImplicit costThe opportunity cost of self-owned, self-employed resources — no cash changes handsthe salary the advocate could haveearned in a firm; return on own capital investedAccountingcostExplicit costs only — the bookkeeper's ledgerthe rent and salary actually paidOpportunitycostValue of the next-best alternativeforgone (Unit 1.4)earnings as in-house counsel, forgoneEconomiccostExplicit + implicit costs — the economist's full ledgerbooks + the forgone salaryThe consequences (two exam lines):1. Economic profit = revenue − (explicit + implicit costs); Accounting profit = revenue− explicit costs only. Economic profit is therefore smaller — and a firm earning zero economic profit is doing exactly as well as its next-best alternative: it earns normal profit (the minimum return that keeps it in the business — itself an implicit cost).2. Normal profit is a cost; supernormal (above-normal) profit invites entry. That single sentence drives the whole theory of markets (3.4).