What is the difference between explicit costs and implicit costs? Explain your answer using examples
Explicit costs occur when an actual out-of-pocket payment is made. For example, a pencil manufacturing firm needs to pay wages to its workers. Implicit costs, however, do not record an out-of-pocket cost but instead quantify what has been given up. For example, a pencil manufacturer can invest his or her money in someone else's business and earn profits without taking the risk of entrepreneurship. This profit given up is an implicit cost of the business.
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Did the 1957 Treaty of Rome turn the EU into a truly unified market?
A) Yes, it paved the way for the current EMU. B) No, although it established a customs union, it failed to remove barriers to the movement of goods and factors within Europe. C) No, it was only after the German unification and locating the ECB in Frankfurt that unity was achieved. D) No, since the Northern members of the EU had larger endowments of capital and skilled labor. E) No, the Treaty of Rome created more trade barriers between European countries.
Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g., bauxite) market?
a. high prices b. low price elasticity of demand c. high compatibility of member interests d. significant barriers to entry e. unequal member ownership of the natural resources