An example of an explicit cost of production would be the
A)cost of forgone labor earnings for an entrepreneur.
B)lost opportunity to invest in capital markets when the money is invested in one's business.
C)lease payments for the land on which a firm's factory stands.
D)Both a and c are correct.

Question

Quizplus · Accepted Answer

The lease payments for the land on which a firm's factory stands are an explicit cost of production because they are a direct, out-of-pocket expense paid by the firm to use the necessary land for production. Option A, the cost of forgone labor earnings for an entrepreneur, is an implicit cost because it represents the labor that the entrepreneur could have earned if they had chosen another career path. Option B is also an implicit cost because it represents the lost opportunity to earn a return on investment in capital markets. Option D is incorrect because option A is an implicit cost, not explicit.

An Example of an Explicit Cost of Production Would Be