A producer invests his own savings in starting a business and employs a manager to look after it.
A producer invests his own savings in starting a business and employs a manager to look after it. Identify implicit and explicit costs from this information. Explain.
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Imputed interest of owner's self owned savings is implicit cost because implicit costs are incurred on the use of self-owned inputs Salary paid to manager to look after the business is explicit cost because it is the expense incurred by the producer for hiring the services of the manager from the market.
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