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Are depreciation charges implicit cost?
yes, depreciation is an implicit cost. but this implicit cost is added to total costs in calculating accounting profits.
What are economists referring to when they talk about cost?
Opportunity Cost
What is implicit cost of capital?
the opportunity cost or value of the best by a business
Which would be an implicit cost for a firm?
An implicit cost for a firm refers to the opportunity cost of using resources that could have been employed elsewhere. For example, if an entrepreneur invests their own capital into a business instead of earning interest on it in a savings account, the foregone interest represents an implicit cost. Similarly, if the owner dedicates their time to the business rather than working for a salary elsewhere, that lost income is also considered an implicit 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.
Are depreciation charges implicit cost?
yes, depreciation is an implicit cost. but this implicit cost is added to total costs in calculating accounting profits.
1 Explicit cost and Implicit cost are the two dimensions of cost What role does cost play in financial decisions?
Explicit cost and Implicit cost are the two dimensions of cost What role does cost play in financial decisions?
What are economists referring to when they talk about cost?
Opportunity Cost
What is implicit cost of capital?
the opportunity cost or value of the best by a business
Example of implicit cost?
There is almost an implicit assumption that tutors know about these things.
Which would be an implicit cost for a firm?
An implicit cost for a firm refers to the opportunity cost of using resources that could have been employed elsewhere. For example, if an entrepreneur invests their own capital into a business instead of earning interest on it in a savings account, the foregone interest represents an implicit cost. Similarly, if the owner dedicates their time to the business rather than working for a salary elsewhere, that lost income is also considered an implicit 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.
Why do economists measure the cost of things when opportunity cost is what you actually are considering we when decide whether or not to purchase something?
it is easier for economists to measure "cost" than "opportunity cost"(because people's tastes are different and changeable)
Why would an accountant say a firm is making a profit and an economist say it is losing money?
Economists always include both implicit and explicit costs in the calculation of their profits while accountants only cater for explicit costs when calculating profits.So due to the inclusion of opportunity costs, which can be termed implicit costs, economists' profits will always be lower than accountants' profits.Hence an accountant may say they are making profits while it is different from an economist's view.
What do economists the next best alternative that had to be given up for the one chosen?
opportunity cost
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."
Is payment for leasing a building for the firm an implicit cost for a firm?
Payment for leasing a building is generally considered an explicit cost, as it involves a direct monetary transaction that is clearly accounted for in the firm's financial statements. However, if the firm owns the building and could have earned rental income by leasing it out to another party, the opportunity cost of not renting it is an implicit cost. Thus, while leasing payments are explicit costs, the potential income from alternative uses of owned property represents an implicit cost.
