Question

Implicit costs are: a. Regarded as costs by accountants, but not economists. b. Payments that a firm makes to other firms or individuals who supply resources to it. c. Opportunity costs such as the value of leisure time, or the highest and best use of the business's assets. d. Costs that vary proportionally with output.

Answer 1

Answer: Option C

Explanation: Implicit cost or opportunity cost is the loss of profit from best alternative that is foregone. It is the cost directly paid by the individual himself rather than paying it to others as in case of explicit costs.

Implicit costs are not deducted while calculating accounting profit but they are when calculating economic profit. These costs usually remain fixed as the alternative has been rejected already.

So, from the above we can conclude that option C is correct.