Which of the following is the best example of an explicit cost?
out of these 4 which one is the best example of explicit cost?
an employee's wages
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Of these, the best example of an explicit cost is the first one; an employee’s wages.
Explicit costs are those costs that the owner of a firm has to pay to other people. This covers everything that we would normally think of as a cost of doing business. It covers such things as the wages paid to employees, the rents paid on buildings, and the costs of the materials used to make a product. This is in contrast to implicit costs, which are the value of things (such as the wages they could be making in a different job) that the owner of a firm foregoes in order to run the firm. Of the choices given, an employee’s wages are most clearly an example of an explicit cost.
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