Explain monetary cost.

1.	Explain monetary cost.
Answer» Monetary cost: Generally, the amount that the producer pays monetarily for the process of production is called its monetary cost. Thus, the cost of production in terms of money is known as monetary cost. Monetary cost includes wages, rent, raw material, fuel and the total of all the expenditure made by the producer. Example: If a factory producing pens incur the cost of ₹ 50,000 to produce 1000 units of pen, the monetary cost to produce 1,000 units of pen is ₹ 50,000. Real cost and opportunity cost have many limitations which make their calculation very difficult. Hence, the concept of monetary cost is widely used in economic analysis, for decisions related to production and in price determination. Since cost of production is calculated in terms of money, the concept of monetary cost is important.

Answer»

Monetary cost:

Generally, the amount that the producer pays monetarily for the process of production is called its monetary cost. Thus, the cost of production in terms of money is known as monetary cost. Monetary cost includes wages, rent, raw material, fuel and the total of all the expenditure made by the producer.

Example:

If a factory producing pens incur the cost of ₹ 50,000 to produce 1000 units of pen, the monetary cost to produce 1,000 units of pen is ₹ 50,000.
Real cost and opportunity cost have many limitations which make their calculation very difficult. Hence, the concept of monetary cost is widely used in economic analysis, for decisions related to production and in price determination. Since cost of production is calculated in terms of money, the concept of monetary cost is important.

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Explain monetary cost.

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