Home › AP Microeconomics › Economics › Production, Costs and Industry Structure › Out-of-pocket costs, meaning actual payments a f…
Out-of-pocket costs, meaning actual payments a firm makes, are called:
AExplicit costs
BImplicit costs
CMarginal costs
DAverage costs
Answer & Solution
Correct answer: A. Explicit costs
1. A firm gives up two different kinds of thing when it produces.
2. Explicit costs are out-of-pocket costs, that is, actual payments.
3. Wages paid and rent handed over are examples.
4. Implicit costs are more subtle, but just as important.
_Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 7 'Production, Costs and Industry Structure', sections 7.1-7.4_
Related questions
Diminishing marginal returns is described as the general concept behind:The reason capital is treated as the fixed input in the short run is that it:Economies of scale become relevant only after a firm has settled its:Implicit costs are described as more subtle than explicit costs but:A firm reporting positive accounting profit could still be making:Accounting profit differs from economic profit because accounting profit leaves out:Breaking total costs into fixed and variable parts provides the basis for calculating:Once a firm has chosen its least costly production technology, it next considers the: