An explicit cost is an out-of-pocket expense that requires payment. Option (A) is incorrect because an opportunity cost is an implicit cost for which payment is not required. Option (C) is also incorrect because there is no general rule that explicit costs are always higher than implicit costs.

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An Explicit Cost Is

Question 26

Multiple Choice

An explicit cost is:

A) an opportunity cost for which payment is not required.
B) an out-of-pocket expense.
C) always larger than an associated implicit cost.
D) both (a) and (b)

Correct Answer: