Efficiency, equity and production costs

Instructions

After reviewing the study material in this module, answer the following exercise.

Exercise I: Explicit and implicit costs (20 points in total / 5 points each)

Determine and explain whether each of the following is an explicit or implicit cost:

Remember to explain in one or two sentences the reason for your answer.

a The income from wages an owner could earn if he did not work for himself.

b The payment of rent for a warehouse that is rented by the company.

c The possible income received from the rental to another company of a building owned by the company that uses it as a warehouse for its own production.

d Payments made for labor hired in the labor market.