Question
Distinguish between explicit costs and implicit costs. Give examples.

Answer

Explicit cost is the actual monetary expenditure on inputs like expenditure on raw materials, wages, interest, rent etc.
Implicit cost, on the other hand, is the estimated value of the inputs supplied by the owner of the firm, like imputed salaries of the owner, imputed rent of the building of the owner, imputed interest on the money invested by the owner etc.

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