Question

What do wages paid to factory workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common? Multiple Choice None are either implicit or explicit costs. All are explicit costs. All are implicit costs. All are opportunity costs.

Answer 1

D) All are opportunity costs.

Explicit fees are input expenses that require an outlay of cash via the firm. Implicit fees are input expenses that do not require an outlay of cash by means of the firm.

An example of an implicit cost is the foregone profits that a business owner-manager ought to have earned operating for someone else. given that constant expenses are regular as output will increase, common fixed prices are also regular.

Examples of implicit fees consist of the loss of interest earnings on funds and the depreciation of equipment for a capital project. they will additionally be intangible expenses that are not easily accounted for, inclusive of whilst an owner allocates time in the direction of the renovation of a organization, in preference to the use of those hours some place else.

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