A firm produces 200 units of good X. Actual money spent on producing this good is Rs. 2000. The owner supplied some inputs worth Rs. 800 for which he does not receive any payment. Economic cost calculated to produce this commodity is Rs. 3000. How do you account for the difference in costs.

A firm produces 200 units of good X. Actual money spent on producing t

1.	A firm produces 200 units of good X. Actual money spent on producing this good is Rs. 2000. The owner supplied some inputs worth Rs. 800 for which he does not receive any payment. Economic cost calculated to produce this commodity is Rs. 3000. How do you account for the difference in costs.
Answer» Solution :ECONOMIC cost=Explicit cost+Implicit cost Economic cost=(Actual money spent)+(cost of inputs SUPPLIED by the owner+Normal Profit) =3000=(2000)+(800+Normal Profit) Normal Profit = 3000-2800=Rs.200 Difference in COSTS in normal profit.