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Question
State the differences between money cost and real cost.
Distinguish Between
Solution
- Money Cost:
- It is the total money expenses incurred by a firm in producing a commodity.
- It includes the cost of raw materials, payments of wages and salaries, rent, interest, etc.,
- It is also called prime cost or direct cost or nominal cost.
- Real Cost:
- It refers to the payment made to compensate for the efforts and sacrifices of all factor owners for their services in production.
- It includes the efforts and sacrifices of factors of production.
- Landlords effort is the use of land, capitalists to save and invest, and workers in foregoing leisure.
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Cost Concepts
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