Examples of implicit cost in the following topics:
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- Economic profit consists of revenue minus implicit (opportunity) and explicit (monetary) costs; accounting profit consists of revenue minus explicit costs.
- The biggest difference between accounting and economic profit is that economic profit reflects explicit and implicit costs, while accounting profit considers only explicit costs.
- In contrast, implicit costs are the opportunity costs of factors of production that a producer already owns.
- The implicit cost is what the firm must give up in order to use its resources; in other words, an implicit cost is any cost that results from using an asset instead of renting, selling, or lending it.
- Economic profit is the difference between total monetary revenue and total costs, but total costs include both explicit and implicit costs.
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- The opportunity costs associated with any activity may be explicit, out of pocket, expenditures made in monetary units or implicit costs that involve sacrifice that is not measured in monetary terms.
- It is often the job of economists and accountants to estimate implicit costs and express them in monetary terms.
- In economics both implicit and explicit opportunity costs are considered in decision making.
- A "normal profit" is an example of an implicit cost of engaging in a business activity.
- An implied wage to an owner-operator is an implicit opportunity cost that should be included in any economic analysis.
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- In one year, the firm earns a total revenue of $50,000, while spending $15,000 on production (explicit costs) and having $10,000 in foregone wages, rent, and interest (opportunity costs).
- Eventually, the firm's revenue will fall as market price decreases, until the total revenue just covers production costs and opportunity costs, and economic profit equals zero.
- Economic profit is total revenue minus explicit and implicit (opportunity) costs.
- In contrast, accounting profit is the difference between total revenue and explicit costs- it does not take opportunity costs into consideration, and is generally higher than economic profit.
- Graphically, this is seen at the intersection of the price level with the minimum point of the average total cost (ATC) curve.
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- In the case of eminent domain, there are costs (opportunity costs) to the authority that defines and enforces the transfer of ownership of goods (property rights).
- Individuals who are affected by eminent domain incur costs as well.
- There are also costs of using exchange.
- The costs of using exchange are referred to as "transaction costs" (see Coase, "Nature of the Firm," 1937).
- It should be noted that these human creations might be intentional and explicit or unintentional and implicit.
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- Rules may by implicit or explicit.
- Implicit rules may also be important constraints.
- Implicit rules are not consciously created but must still be communicated implicitly or explicitly.
- Every action has a cost and a benefit (the cost or benefit may be zero).
- If the benefits associate with an action exceed the cost; it is an alternative that is consistent with self-interest.
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- Part of the cost of acquiring or selling a good is the risk an punishment of violating the law.
- Property rights can also be enforced by implicit social institutions.
- There may be costs or benefits that impact individuals who are not engaged in the actual use of the good.
- Externalities can be positive (a benefit is conferred on a third party) or negative (a cost is imposed on individuals).
- The process of capture and use of these goods imposes cost on others.
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- Marginal cost is the change in total cost when another unit is produced; average cost is the total cost divided by the number of goods produced.
- Marginal cost is not related to fixed costs.
- When the average cost declines, the marginal cost is less than the average cost.
- When the average cost increases, the marginal cost is greater than the average cost.
- This graph is a cost curve that shows the average total cost, marginal cost, and marginal revenue.
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- Ceteris paribus is a Latin expression which notifies the reader that there are other things to consider but they will not be changed and remain implicit so that we can focus on the relationship described.
- The sacrifice of the reduced production of Yawls is the opportunity cost of the additional amount of Xebecs.
- Opportunity cost is one of the major tools used to make decisions about what and how much to produce.
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- In economics, the total cost (TC) is the total economic cost of production.
- It consists of variable costs and fixed costs.
- Total cost is the total opportunity cost of each factor of production as part of its fixed or variable costs .
- Variable costs are also the sum of marginal costs over all of the units produced (referred to as normal costs).
- Economic cost is the sum of all the variable and fixed costs (also called accounting cost) plus opportunity costs.
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- An example of economic cost would be the cost of attending college.
- So, the economic cost of college is the accounting cost plus the opportunity cost.
- So, the economic cost of college is the accounting cost plus the opportunity cost.
- Total cost (TC): total cost equals total fixed cost plus total variable costs (TC = TFC + TVC) .
- Variable cost (VC): the cost paid to the variable input.