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» <html><body><p></p>Solution :<a href="https://interviewquestions.tuteehub.com/tag/economic-448435" style="font-weight:bold;" target="_blank" title="Click to know more about ECONOMIC">ECONOMIC</a> cost=Explicit cost+Implicit cost <br/> Economic cost=(Actual money spent)+(cost of inputs <a href="https://interviewquestions.tuteehub.com/tag/supplied-3090548" style="font-weight:bold;" target="_blank" title="Click to know more about SUPPLIED">SUPPLIED</a> by the owner+Normal Profit) <br/> =<a href="https://interviewquestions.tuteehub.com/tag/3000-306271" style="font-weight:bold;" target="_blank" title="Click to know more about 3000">3000</a>=(2000)+(800+Normal Profit) <br/> Normal Profit = 3000-2800=Rs.200 <br/> Difference in <a href="https://interviewquestions.tuteehub.com/tag/costs-25578" style="font-weight:bold;" target="_blank" title="Click to know more about COSTS">COSTS</a> in normal profit.</body></html>