Payment made to others for the purchase of factors of production is known as _____.
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Correct answer: A
Explanation
The correct answer is option 1 i.e. Explicit cost.
- Payment made to others for the purchase of factors of production is known as Explicit costs.
- Explicit cost is the price paid to others for the acquisition of production inputs.
- Payroll, rent, raw materials, and other direct business expenditures and expenses are included.
- The explicit cost of capital, often known as the "discount rate," is the ratio of the present value of cash inflows and outflows that result from incremental financing opportunities.