Concepts Of Cost And Revenue — Chapter Summary

Cost of production means the cost

Cost of production means the cost of purchasing inputs. It includes payments such as wages, raw materials, rent, and interest.

Explicit cost is the actual money

Explicit cost is the actual money expenditure incurred on hired or purchased inputs. It is recorded in the business ledger and paid to outsiders.

Implicit cost is the imputed value

Implicit cost is the imputed value of self-owned or self-supplied resources such as the owner's building, own capital, and normal profit. No actual mo

Normal profit is the minimum reward

Normal profit is the minimum reward of the entrepreneur for organising business. It is the opportunity cost of entrepreneurship and is part of implici

Economic cost equals explicit cost plus

Economic cost equals explicit cost plus implicit cost, including normal profit.