Which of the following is an implicit cost?
A)salaries paid to owners who work for their own firm
B)interest on money borrowed to finance equipment purchases
C)cash payments for raw materials
D)wages paid to hourly employees
E)foregone rent on office space owned and used by the firm

Question

Quizplus · Accepted Answer

Foregone rent on office space owned and used by the firm is an implicit cost because it represents the opportunity cost of using the space for the firm's own business instead of renting it out to another tenant and earning rental income. Implicit costs are not monetary payments, but rather represent the value of resources that are used in a certain activity and could have been used in an alternative activity. The other options listed are explicit costs, which are monetary payments made by the firm for inputs such as salaries, interest, and wages.

Which of the Following Is an Implicit Cost