Question

Select all implicit costs from the list below.

A.Wages
B.Raw materials
C.Revenues
D.Rent
E.Profit earned in similar businesses

Answer 1

Implicit costs are opportunity costs for using resources a company owns. From the given list, the correct implicit cost is the profit earned in similar businesses as it represents potential earnings lost due to opportunity costs.

Step-by-step explanation:

In business economics, the costs a company incurs can be classified as either explicit costs or implicit costs. Explicit costs are actual cash payments for resources like wages and raw materials, while implicit costs represent the opportunity costs associated with using resources that the company already owns. For a student identifying implicit costs from a list, the correct selections would be:

• Profit earned in similar businesses

This is because such profits represent potential earnings lost by investing time and capital elsewhere, which is an opportunity cost and thus an implicit cost. Other elements, such as revenues, are not costs at all, and wages and rent are explicit costs. Additionally, depreciation could be seen as an implicit cost, though it's not listed as an option in this scenario.