Question
Distinguish between explicit cost and implicit cost.
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S No.
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Explicit Cost
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Implicit Cost
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(a)
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Explicit costs are the costs which are incurred by making payments to the factors hired or purchased.
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Implicit costs are the costs which are estimated value of inputs provided by the owners themselves.
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(b)
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It is ‘paid-out' cost.
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It is ‘paid-in' cost.
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(c)
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Examples: Payment of wages, payment of rent, purchases of raw materials.
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Examples: rent of the owner occupied building, salary for own labour supplied.
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