Study Notes on Explicit and Implicit Costs
Explicit and Implicit Costs
Explicit Costs
Definition:
Monetary payments made by individuals, firms, and governments for the use of resources owned by others.
Opportunity Cost
Definition:
The value of the next-best foregone alternative.
Implicit Costs
Definition:
The opportunity costs of using owned resources.
Relationship between Costs
Businesses and firms face both explicit and implicit costs when operating.