Answer:
In this case the implicit cost consists of imputed value of the owner s (manager's) services and the explicit cost consists of the rent paid for the shop. Implicit cost (Imputed cost) refers to cost of the factor that a producer neither hires nor purchases. Such costs are not actually paid by the producers yet are included in the cost of production. It is a difference between the economic profit and accounting profit. On the other hand, explicit costs are those costs that are borne directly by a firm and are paid to the factors of production. Another way of distinguishing the two is that while explicit costs are referred to as out - of - pocket expenses, on the other hand, implicit costs do not result in any cash outlay from the business. Thus, in the case given, the rent for the shop is to be paid by the firm, so it is considered as explicit cost, while, the costs of owner's service are considered as implicit costs, as no cash is expended for hiring such services.
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