Question on: JAMB Economics - 1995
The opportunity cost of the use of productive resources which a producer owns and so does not pay constitutes?
A
a fixed cost
B
an implicit cost
C
a variable cost
D
a prime cost
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Correct Option: B
The opportunity cost of using resources a producer already owns, but for which they don't pay an explicit cost, is an implicit cost.
- Implicit costs are the opportunity costs of using resources that the producer already owns. These costs are not reflected in the firm's accounting records.
- Fixed costs are costs that do not vary with the level of output.
- Variable costs are costs that change with the level of output.
- Prime cost is the sum of direct materials and direct labor costs.
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