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The cost that firm incurs in hiring or purchasing any factor of production is referred as:
- a)Explicit cost
- b)Implicit cost
- c)Variable cost
- d)Fixed cost
Correct answer is option 'A'. Can you explain this answer?
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The cost that firm incurs in hiring or purchasing any factor of produc...
Explicit Cost
Definition: The cost that firm incurs in hiring or purchasing any factor of production is referred to as explicit cost. These are the actual monetary payments made by a firm for the use of resources from a factor market.
Explanation: In economics, the cost of production can be classified into two types: explicit cost and implicit cost. Explicit cost refers to the direct expenses that a firm incurs while carrying out its operations. These expenses are tangible and can be easily accounted for in the financial statements of the firm. Examples of explicit costs include wages paid to employees, rent paid for leasing a factory, and payments made for raw materials and other supplies.
On the other hand, implicit costs are the opportunity costs that a firm incurs while using its own resources for production. These costs are not directly visible in the financial statements of the firm, but they represent the value of the next best alternative forgone. Examples of implicit costs include the salary of the owner of the business, who could have earned a salary by working in a different firm, and the rental income foregone by the owner of the factory who could have rented out the factory for other purposes.
Conclusion: In a nutshell, explicit cost is the actual cost that a firm incurs while purchasing or hiring the factors of production for its operations. These costs are easily verifiable and can be accounted for in the financial statements of the firm.
Definition: The cost that firm incurs in hiring or purchasing any factor of production is referred to as explicit cost. These are the actual monetary payments made by a firm for the use of resources from a factor market.
Explanation: In economics, the cost of production can be classified into two types: explicit cost and implicit cost. Explicit cost refers to the direct expenses that a firm incurs while carrying out its operations. These expenses are tangible and can be easily accounted for in the financial statements of the firm. Examples of explicit costs include wages paid to employees, rent paid for leasing a factory, and payments made for raw materials and other supplies.
On the other hand, implicit costs are the opportunity costs that a firm incurs while using its own resources for production. These costs are not directly visible in the financial statements of the firm, but they represent the value of the next best alternative forgone. Examples of implicit costs include the salary of the owner of the business, who could have earned a salary by working in a different firm, and the rental income foregone by the owner of the factory who could have rented out the factory for other purposes.
Conclusion: In a nutshell, explicit cost is the actual cost that a firm incurs while purchasing or hiring the factors of production for its operations. These costs are easily verifiable and can be accounted for in the financial statements of the firm.
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The cost that firm incurs in hiring or purchasing any factor of produc...
Whenever producer make payments for purchasing or hiring inputs it is known as explicit cost and accounting cost
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The cost that firm incurs in hiring or purchasing any factor of production is referred as:a)Explicit costb)Implicit costc)Variable costd)Fixed costCorrect answer is option 'A'. Can you explain this answer?
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