Implicit Costs of Production

Implicit costs are the opportunity costs of using resources in a particular manner. These costs do not involve any actual cash outflows but represent the foregone opportunities or benefits that could have been obtained by using the resources in an alternative way. In the context of production, implicit costs are the costs incurred by a firm when it uses its own resources instead of obtaining them from an external source.

Explanation:

Among the options given, the correct answer is option 'C' - Interest on owned money capital. Here's an explanation of why it is an implicit cost of production:

Definition of Implicit Costs:

Implicit costs are the costs that are not explicitly incurred by a firm but are still considered as costs because they represent the opportunity cost of using resources in a particular manner.

Explanation of Options:

a) Wages of the Labor:

Wages of labor are an explicit cost of production. They represent the actual cash outflows made by the firm to compensate the labor for their services. Therefore, wages of labor are not considered as implicit costs.

b) Charges for Electricity:

Charges for electricity are also an explicit cost of production. They represent the actual cash outflows made by the firm to pay for the electricity used in the production process. Therefore, charges for electricity are not considered as implicit costs.

c) Interest on owned money capital:

Interest on owned money capital is an implicit cost of production. It represents the opportunity cost of using the firm's own money capital in the production process instead of investing it elsewhere. The firm could have earned interest on its money capital if it had invested it in other ventures or financial instruments. Therefore, interest on owned money capital is considered as an implicit cost.

d) Payment for raw material:

Payment for raw material is an explicit cost of production. It represents the actual cash outflows made by the firm to purchase the raw materials used in the production process. Therefore, payment for raw material is not considered as an implicit cost.

Conclusion:

Among the options given, the only implicit cost of production is the interest on owned money capital (option 'C'). Implicit costs represent the opportunity costs of using resources in a particular manner and do not involve any actual cash outflows.