Q.What is meant by Explicit Cost ?

Explicit cost is the actual cash payment made by a firm to outsiders for hired factors and purchased inputs, and it is entered in the account books.

In the Tamil Nadu HSC Class-11 Economics syllabus, costs are divided into explicit and implicit costs. Explicit cost (also called paid-out cost or accounting cost) is the money that a firm actually pays to parties outside the firm for the factor services and materials it uses in production.

Examples include:

• Wages and salaries paid to workers,
• Rent paid for premises,
• Interest paid on borrowed capital,
• Prices paid for raw materials, fuel and power,
• Payments for transport, advertising and insurance. …