Wages to the labour
Rent on building
Interest on owned money capital
Payment for machine
Answer is Right!
Answer is Wrong!
The correct answer is C. Interest on owned money capital.
Implicit costs are costs that are not directly paid out in cash. They are the opportunity costs of using resources that are owned by the firm. In this case, the firm is using its own money capital, which could be earning interest if it were invested elsewhere. The interest that the firm could earn on its money capital is an implicit cost of production.
A. Wages to the labour are explicit costs, because the firm pays wages to its employees in cash.
B. Rent on building is an explicit cost, because the firm pays rent to the owner of the building in cash.
D. Payment for machine is an explicit cost, because the firm pays the supplier of the machine in cash.