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Question
A producer starts the business in the building owned by him and borrows money for running it. Identify implicit cost.
Solution
Implicit cost is the value of self-owned inputs in their next best alternative use. Here, the producer using his own building for business activity is the implicit cost.
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| Output (Units) |
Average Fixed Cost (Rs ) |
Marginal Cost (Rs ) |
Average Variable Cost (Rs ) |
Average Cost (Rs ) |
| 0 | 30 | |||
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| 4 | ... | ... | 23 | ... |
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Average Fixed Cost (Rs) |
Average Variable Cost (Rs) |
Marginal Cost (Rs) |
Total Cost (Rs) |
| 1 | 120 | 40 | ... | ... |
| 2 | 60 | 56 | ... | 232 |
| 3 | ... | 54 | ... | ... |
| 4 | 30 | ... | 54 | ... |
| 5 | ... | ... | ... | ... |
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