Explanation:

- Normal profits are included in:

- Option 1: Implicit Cost

- This is the opportunity cost of using resources owned by the firm for production, including the opportunity cost of owner’s time and investment.

- Normal profits are part of implicit costs because they represent potential earning opportunities foregone by investing in the current business venture instead of the next best alternative.

- Correct Answer.

- Option 2: Explicit Cost

- These are direct, out-of-pocket expenses that a firm incurs, such as salaries, rent, and materials.

- These costs are easily identifiable and recorded in financial statements.

- Option 3: Fixed Cost

- Costs that do not change with the level of output, such as rent or salaries of permanent staff.

- While necessary for operation, they differ from implicit costs.

- Option 4: Variable Cost

- Costs that change with production volume, like raw materials and direct labor.

- They fluctuate based on the scale of production.