Question

Which would be an implicit cost for a firm? The cost:
i) of worker wages and salaries for the firm.
ii) paid for leasing a building for the firm.
iii) paid for production supplies for the firm.
iv) of wages foregone by the owner of the firm. ​

Answer 1

of worker wages and salaries for the firm

Answer 2

$\sf\huge\bold{Answer:}$

$\tt\red{ option \: iv) \: is \: correct \: answer.}$

What is an implicit cost?

• Inplicit cost means the income that is forgone from making a choice of not to work.

• Alternatively known as :

Implicit cost is also known as implied cost, notional cost or imputed cost.

• Determining costs :

Implicit cost does not have track and cannot be determined precisely.

• Calculation of profit :

Implicit cost helps only in calculating economic profit.

• Cash requirement :

Implicit costs do not require an outflow of cash.

• Basic representation :

It represents an opportunity cost that arises when a company uses internal resources toward a project without any explicit compensation for the utilization of resources.