Question

Which of the following describes an implicit cost?

a. They are an out-of-pocket expense.
b. Accountants include these costs in total costs.
c. NO opportunity cost is involved.
d. NO outlay of money is

Answer 1

An implicit cost is a non-monetary opportunity cost involving resources already owned by the firm, such as foregone salary or the use of personal space for business purposes.

Step-by-step explanation:

An implicit cost describes a type of expense that does not involve a direct monetary outlay, but rather represents the opportunity cost associated with using resources owned by a firm or an individual. Implicit costs often include things like the foregone income associated with an owner working in their own business without a formal salary, or the lost opportunity of renting out a space that is instead used for the business.

This type of cost also encompasses the depreciation of goods, materials, and equipment needed for operations, as well as non-monetary costs such as the value of one's leisure time when invested in starting a new business. Thus, while explicit costs involve actual payments, such as wages and rent, implicit costs are more about the economic trade-offs made when using resources that could be deployed elsewhere.