Which of the Following Is an Example of an Implicit

question 108

Multiple Choice

Which of the following is an example of an implicit cost of production?

• A) the income an entrepreneur could have earned working for someone else
• B) the cost of labour for a farmer who tills his fields
• C) the income of a labourer in a factory that assembles DVD players
• D) the cost of raw materials used to produce bread in a bakery

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Definitions:

Amortization

The gradual reduction of a debt over a period of time or the spreading out of capital expenses related to intangible assets over their useful life.

Matching Principle

An accounting principle that dictates expenses should be recognized in the same period as the revenues they helped generate.

Depletion

The accounting process of allocating the cost of natural resources over their productive life, used in industries like mining, timber, and oil extraction.

Estimated Lives

The expected period over which an asset is anticipated to be usable by the company, affecting depreciation and amortization calculations.