If a firm uses factor inputs that are personally owned by the firm's owner, then economists refer to the opportunity cost of these inputs as
A) sunk costs.
B) direct production costs.
C) implicit costs.
D) inverted costs.
E) accounting costs.

Question

Quizplus · Accepted Answer

When a firm uses factor inputs that are personally owned by the firm's owner, such as the owner's own labor, economists refer to the opportunity cost of these inputs as implicit costs. Implicit costs are the opportunity costs of using resources that are not purchased in the market. In this case, the owner is not receiving a salary for their labor, but their labor has an opportunity cost in terms of what they could have earned if they had chosen to work somewhere else. Sunk costs are costs that have already been incurred and cannot be recovered, direct production costs refer to the costs of purchasing inputs from the market, inverted costs and accounting costs are not relevant in this context.

If a Firm Uses Factor Inputs That Are Personally Owned