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An implicit cost is any cost that has already occurred but is not necessarily shown or reported as a separate expense. It represents an opportunity cost that arises...
What is an Implicit Cost? An implicit cost is a non-monetary opportunity cost that is the result of a business – rather than incurring a direct, monetary expense – utilizing an asset or resource that it already owns. The cost is a non-monetary one because there is no actual payment by the business for the use of the existing resource.
Implicit costs are opportunity costs that arise when a company allocates internal resources to a project without receiving a clear financial reward. They represent the potential income that could have been earned by using resources elsewhere.
Implicit costs imply expenses where payments are not made out to any individual or firm. These two definitions of cost are important for distinguishing between two conceptions of profit, accounting profit, and economic profit.
We can distinguish between two types of cost: explicit and implicit. Explicit costs are out-of-pocket costs, that is, actual payments. Wages that a firm pays its employees or rent that a firm pays for its office are explicit costs.
Imputed costs, also known as implied or notional costs, are hypothetical expenses that do not involve direct cash outlays but are essential for accurate cost assessment. These costs are often used in internal decision-making to reflect the true economic value of resources.
In economics, an implicit cost, also called an imputed cost, implied cost, or notional cost, is the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent.