CA Foundation Exam > CA Foundation Questions > Economic cost meansa)Accounting cost + Implic...
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Economic cost means
- a)Accounting cost + Implicit cost
- b)Accounting cost + Marginal cost
- c)Cash cost + Opportunity cost
- d)Implicit cost
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
Economic cost meansa)Accounting cost + Implicit costb)Accounting cost ...
Explanation:
Accounting cost:
- Accounting cost refers to the actual expenses incurred by a business to produce goods or services.
- It includes expenses such as wages, rent, utilities, raw materials, and other costs that are recorded in the company's accounting books.
Implicit cost:
- Implicit costs are the opportunity costs of using resources that a company already owns.
- These costs are not recorded in the accounting books but represent the value of resources that could have been used elsewhere.
Economic cost:
- Economic cost is the total cost incurred by a company to produce goods or services, taking into account both accounting costs and implicit costs.
- It is calculated by adding accounting costs and implicit costs together.
Therefore, economic cost is equal to accounting cost plus implicit cost, as stated in option 'A'. This concept is important in economics as it provides a more comprehensive understanding of the true cost of production for a business.
Accounting cost:
- Accounting cost refers to the actual expenses incurred by a business to produce goods or services.
- It includes expenses such as wages, rent, utilities, raw materials, and other costs that are recorded in the company's accounting books.
Implicit cost:
- Implicit costs are the opportunity costs of using resources that a company already owns.
- These costs are not recorded in the accounting books but represent the value of resources that could have been used elsewhere.
Economic cost:
- Economic cost is the total cost incurred by a company to produce goods or services, taking into account both accounting costs and implicit costs.
- It is calculated by adding accounting costs and implicit costs together.
Therefore, economic cost is equal to accounting cost plus implicit cost, as stated in option 'A'. This concept is important in economics as it provides a more comprehensive understanding of the true cost of production for a business.
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Economic cost meansa)Accounting cost + Implicit costb)Accounting cost + Marginal costc)Cash cost + Opportunity costd)Implicit costCorrect answer is option 'A'. Can you explain this answer?
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