Question

A. Distinguish between explicit and implicit costs.

B. Give a few examples of Implicit costs of running a restaurant.

C. Give a few examples of Explicit costs of running a restaurant.

Answer 1

Ans:

A)

Implicit cost is the opportunity cost resulting from an alternative forgone when another alternative is choosen.Explicit cost are the actual cost incurred during the course of running a business.

B) Examples of implicit costs of running a restaurant are loss of interest income on funds invested in restaurant,depreciation of equipment in restaurant.

C) Examples of explicit costs of running a restaurant are rent,wages,material cost and other maintenance expenses.