Cash payments for steel to be used in the production process would be an example of _____

Question

Quizplus · Accepted Answer

The cash payments for steel would be classified as explicit costs since they are direct, out-of-pocket expenses paid by the firm for materials used in the production process. Sunk costs are costs that have already been incurred and cannot be recovered, fixed costs are costs that do not vary with the level of production, implicit costs refer to opportunity costs of using resources for a particular activity instead of an alternative one, and entrepreneurial costs are associated with the risks and uncertainties faced by a business owner. None of these apply to cash payments for steel.

Cash Payments for Steel to Be Used in the Production