1.

State the difference between money cost and real cost?

Answer»
Money costReal cost
1. Production cost expressed in money terms is called as money cost.Real cost refers to the payment made to compensate the efforts and sacrifices of all factor owners for their services in production.
2. Money cost includes the expenditures such as cost of raw materials, payment of wages and- salaries, payment of rent, interest on capital, expenses on fuel and power, expenses on transportation and other types of production related costs.Real cost includes the efforts and sacrifices of landlords in the use of land, capitalists to save and invest, and workers, in foregoing leisure.
3. Money costs are considered as out of pocket expenses.Real cost are considered pains and sacrifices of labour as real cost of production.


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