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Opportunity Cost
Opportunity cost is a cost associated with a decision that includes both the explicitand implicitcosts. The unique aspect of opportunity cost is that it also includes costs associated with making an alternate decision. The costs associated with an alternative are called implicit costs. The accounting cost of making a decision is called the explicit cost.
While explicit, or accounting, costs are fairly easy to calculate, implicit costs are not as easy. Measuring the cost of the best foregone alternative can be not as easy as anticipated. By reading this Wiki right now, you are paying an implicit cost of your next best alternative. This can and often will be different for everyone. For you, it may be that the next best alternative instead of reading this is watching television. For someone else, it may be Surfing the internet.
IMPLICIT COST
A cost that is represented by lost opportunity in the use of a company's own resources, excluding cash. These are intangible costs that are not easily accounted for. For example, the time and effort that an owner puts into the maintenance of thecompany|companyrather than working on expansion.
EXPLICIT COST
A business expense that is easily identified and accounted for. Explicit costs represent clear, obvious outflows from a business that reduce its bottom-line profitability. This contrasts with less-tangible expenses such as goodwill amortization, which are not as clear cut regarding their effects on a business's bottom-line value. Good examples of explicit costs would be items such as wage expense, rent or lease costs, and the cost of materials that go into the production of goods. With these expenses, it is easy to see the source of the cash outflow and the business activities to which the expense is attributed
Wiki User
∙ 10y ago
Wiki User
∙ 9y ago"cost" represents the money paid for something and "opportunity cost" is the value of the thing given up when one chooses something else.
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What is implicit cost of capital?
the opportunity cost or value of the best by a business
What is the difference between opportunity benefits and opportunity cost?
yeahhh
What is the difference between constant opportunity cost and increasing opportunity cost?
Real cost is the price which is real not a fake price
Why do economists bother with implicit cost?
Because opportunity cost doesn't show up as an accounting expense.
Is an investment an implicit cost?
Yes, investment is an implicit cost because it is a firm investing their own money in something that (by definition of an opportunity cost) could have been invested in something else. Investment is the opportunity cost of a firm using their own money, and whether or not the opportunity that the firm invested in is worthwhile is defined by the NROR (the normal rate of return).
What is implicit cost of capital?
the opportunity cost or value of the best by a business
What is the difference between opportunity benefits and opportunity cost?
yeahhh
Difference between imputed and implicit cost?
According to the "Bible" for accounting terminology, Barron's Dictionary of Accounting Terms, 5th Edition, they are the same. In fact, when you look up implicit cost, it refers you to imputed cost. This is the definition of imputed cost: "A cost that is implied but not reflected in the financial reports of the firm: also called implicit cost. Imputed costs consist of opportunity costs of time and capital that the manage has invested in producing the given quantity of production and the opportunity costs of making a particular choice among the alternatives being considered."
What is the difference between constant opportunity cost and increasing opportunity cost?
Real cost is the price which is real not a fake price
Why do economists bother with implicit cost?
Because opportunity cost doesn't show up as an accounting expense.
Is an investment an implicit cost?
Yes, investment is an implicit cost because it is a firm investing their own money in something that (by definition of an opportunity cost) could have been invested in something else. Investment is the opportunity cost of a firm using their own money, and whether or not the opportunity that the firm invested in is worthwhile is defined by the NROR (the normal rate of return).
What is the difference between implicit and explicit theory?
explicit is the market value of all inputs purchased by a producer while implicit cost is the market value of inputs owned by the producer himself.
What is the difference between a chosen investment and one that is passed up?
opportunity cost
Difference between accounting profit and economist's profit?
The accounting profit is the difference between total revenue and total cost excluding the economic cost (opportunity cost) of owner-supplied resources such as time and capital. At the other hand, In the economic cost, we include the opportunity cost in our calculations. · When total revenue exceeds both explicit and implicit costs, the firm earns economic profit. · Economic profit is smaller than accounting profit Another answer culed be: Economic Profit is slightly different than accounting profit, which merely the firm's total revenues minus its total costs. Economic profit is defined as total revenues minus total operating costs minus opportunity cost. Opportunity cost is defined as the cost of the profits you forgo by not doing another activity. For example the opportunity costs of opening a lemonade stand is equal to the difference between the accounting profits of the lemonade stand minus the accounting profits of a more profitable hot dog stand.
Why are costs important in economics?
How do firms incorporate opportunity cost to calculate economic cost? discuss and give example using an explicit economic cost and an implicit economic cost.
Why accounting profit is higher than economic profit?
First of all, we need to understand what is explicit cost and implicit cost. Explicit cost mean real expenses, while implicit cost mean opportunity cost. In accounting profit, we only minus explicit cost, while in economic profit we minus explicit cost and implicit cost. therefore accounting profit is higher than economic profit.
5 Give a brief description of a implicit and explicit cost b actual and opportunity cost?
Fcuk u. Go n search it urself.
