Task: Attempt ALL questions (Show all calculations /working formula) Question 1:

Question

Task: Attempt ALL questions (Show all calculations /working formula) Question 1: Suppose a company IT Logistics incurs the following costs: IT Technician salary OMR 400 Machinery & electrical equipment OMR 300 Raw materials OMR 100 The company owns the building site so it does not have to pay the usual OMR 500 per month in rent. Calculate: (1) What is the explicit cost of production? (ii) What is the implicit cost of production? (ii) What is the total cost of factor inputs used? (iv) What is the total cost of non-factor inputs used? (04 marks)

Explanation / Answer

1a) Explicit cost involve payment of cash.The rent for the landlord, wages for the labourer, interest paid on the funds borrowed, taxes and duties paid to the government and so on, are the explicit cost. So in above ex; explicit cost are techinician salary 400 + Rawmaterial cost 100= 500 explicit cost.

2a) Implicit costs are also called imputed costs.ex; costs are interest on own capital, savings in terms of salary due to own supervision, rent of own premises and so on, so in the above example own building rent 500 is implicit cost

3a)Input factors are also called primary inputs or factors of production those are remuneration of land, Labour, capital ,entrepreneur, technology, so above ex; total input factor are technician salary 400+ building rent 500= 900.

4a) Secondary inputs are know as non factors of production inputs ex; soil, tractor, tools, seeds etc so in the above ex; total non input factors are machinery and electric equipment 300 + raw materials 100= 400.

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