Which of the following is an example of an "implicit cost"?
A)Interest that could have been earned on retained earnings used by the firm to finance expansion.
B)The payment of rent by the firm for the building in which it is housed.
C)The interest payment made by the firm for funds borrowed from a bank.
D)The payment of wages by the firm.

Question

Quizplus · Accepted Answer

Implicit costs are those costs that are not actually paid in cash but represent forgone opportunities. Interest that could have been earned on retained earnings is an example of an implicit cost because it represents the opportunity cost of not investing the funds in an interest-bearing account, but instead using them for expansion. The other options are examples of explicit costs that involve actual cash payments.

Which of the Following Is an Example of an "Implicit