How is an explicit cost defined?
A)As a cost that does not change as output changes.
B)As a nonmonetary opportunity cost.
C)As a cost that involves spending money.
D)As a nonmonetary accounting cost.

Question

Quizplus · Accepted Answer

An explicit cost is a cost that involves spending money, such as purchasing raw materials or paying wages to employees. This distinguishes it from implicit costs, which are nonmonetary opportunity costs like the opportunity cost of time spent on a project that could have been used for other activities. Option A is a common definition of a fixed cost, not an explicit cost. Option D reflects the definition of an accounting cost, but not necessarily an explicit cost.

How Is an Explicit Cost Defined