Question

an individual is both the owner and the manager of a shop taken on rent . Identify implicit cost and explicit cost from this information . Explian.

Answer 1

"An absolute cost is the opportunity value that equals what a firm must give up to use a portion of production for which it already owns and therefore doesn't pay rent.

In the mentioned case, the implicit cost consists of the imputed value of the services provided by the owner who is also manager but needs not to be paid and the exact cost consists of the rent given for the shop.

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