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A producer starts a buisness by investin...

A producer starts a buisness by investing his own savings and hiring the labour. Identify implicit and explicit costs from this information.

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In the give situation:
(i) The producer uses his own savings in the buisness which elsewhere would have earned interest. Therefore imputed value of the interest on the saving invested is implicit cost.
(ii) The cost of hiring labour from the market involves expenditure incurred by the producer. Therefore, wages paid to the labour are explicit costs.
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