Which of the following is an example of an "implicit cost"?

Interest that could have been earned on retained earnings used by the firm to finance expansion.

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The payment of rent by the firm for the building in which it is housed.

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The interest payment made by the firm for funds borrowed from a bank..

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The payment of wages by the firm.

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Solution

The correct option is A Interest that could have been earned on retained earnings used by the firm to finance expansion.
Implicit cost is the cost of self supplied factors of production. Hence Interest that could have been earned on retained earnings used by the firm to finance expansion is implicit cost.

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