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Q: What is explicit cost?
  • A. It is the opportunity cost equal to what a firm must give up in order to use a factor of production.
  • B. It is a direct payment made to others in the course of running a business, such as wage, rent and materials.
  • C. It represents the loss of profit but does not represent a loss of income.
  • D. It is the only cost necessary to calculate a profit, as it clearly affects a company's profits.
Correct Answer: Option B - ): Explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials. In other words explicit costs are normal business costs that appear in a company's general ledger and directly affect its profitability.
B. ): Explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials. In other words explicit costs are normal business costs that appear in a company's general ledger and directly affect its profitability.

Explanations:

): Explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials. In other words explicit costs are normal business costs that appear in a company's general ledger and directly affect its profitability.