Asked by Ciara Lawrence on Jun 05, 2024
Verified
A difference between explicit and implicit costs is that
A) explicit costs must be greater than implicit costs.
B) explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do.
C) implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
D) implicit costs must be greater than explicit costs.
Implicit Costs
The opportunity costs of using resources owned by the firm for its own production instead of earning revenue from these resources elsewhere.
Explicit Costs
These are the direct, out-of-pocket payments made by businesses for operational expenses like wages, rent, and materials.
Monetary Outlay
The amount of money spent on a particular transaction or investment.
- Identify the differences between explicit costs and implicit costs, with illustrations for each.
Verified Answer
SQ
Sameer QaraeenJun 10, 2024
Final Answer :
C
Explanation :
Implicit costs represent the opportunity costs of using resources that the firm already owns, and thus do not require a direct monetary outlay, whereas explicit costs involve direct payment of money.
Learning Objectives
- Identify the differences between explicit costs and implicit costs, with illustrations for each.