Question

Cost incurred on the self-owned factors of production is ________.

• A. fixed cost
• B. variable cost
• C. explicit cost
• D. implicit cost

Answer 1

Answer: (D)

implicit cost

The cost incurred on the self-owned factors of production is an implicit cost because it represents the opportunity cost of using these factors in the production process. Eg. an entrepreneur runs his business but knowing his talents a rival firm is willing to hire him and pay him a salary of Rs. 6,00,000 a year, this Rs. 6,00,000 acts as an implicit cost for the entrepreneur. Here the talent acts as a self owned factor of production.