another term for implicit cost is
While implicit costs are not analyzed on a company's financial statement, they must be considered when making management decisions. One example of an implicit cost is when a company may be able to increase revenue by using resources that are not already at capacity. Implicit costs can also be thought of as intangible costs that are not easily accounted for. For example, the time and effort that an owner puts into the maintenance of the company, rather than working on expansion, can be viewed as an implicit cost of running the business. A cost that is represented by lost opportunity in the use of a company's own resources, excluding cash. Lesson Summary. There are two types of costs that must be considered by a business: explicit costs and implicit costs. Explicit costs are easier to analyze as they are expenses that require a payment and have an amount that can be calculated. Currently, there are no additional costs for having the equipment sitting idle for those extra hours each week. Therefore, there are no explicit costs. However, there is an implicit cost of $50,000 per week by continuing to limit production hours to 40 hours per week. This is the cost of lost income the company has by not taking advantage of the opportunity of producing more. Which is more important to economists, the marginal propensity to consume or the ... Economic profit is a measure of a company's performance found by calculating the amount it generates in revenues. Use Microsoft ... Therefore, the flower shop has an implicit cost of Veronica's potential salary of $60,000. If things were different, the flower shop would have the cost of paying Veronica's salary, but as things stand now, it is an implicit cost because no check is written and no expenditure is charged to the shop. Since economic profit includes these extra opportunity costs, it will always be less than or equal to accounting profit. Lipsey (1975) uses the example of a firm sitting on an expensive plot worth $10,000 a month in rent which it bought for a mere $50 a hundred years before. Implicit cost. From Wikipedia, the free encyclopedia. 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 factor of production which it already owns and thus does not pay rent for. It is the opposite of an explicit cost, which is borne directly. The implicit cost for a firm can be thought of as the opportunity cost related to undertaking a certain project or decision, such as the loss of interest income on funds, or depreciation of machinery used for a capital project.
Intangible costs