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Essay / Research Paper Abstract
This 3-page paper explains the concepts of implicit and explicit costs and provides examples. Bibliography lists 1 source.
Page Count:
3 pages (~225 words per page)
File: D0_MTimexco.rtf
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Unformatted sample text from the term paper:
costs, the first thing that might come to mind is actual cash or assets. However, there are other types of costs, and these are typically calculated when it comes
to a companys profit-maximizing level of output. The most common costs associated with this level are explicit costs and implicit costs. In this paper, we will examine what both
of these costs are, and will try to apply them to specific examples. Before continuing any further, is important to remember that
any economic cost includes all costs -- even opportunity costs, even if those costs are not measured in cash, dollars or cents (State University of New York/Oswego, 2003).
These opportunity costs can include explicit costs were implicit costs (State University of New York/Oswego, 2003). An explicit cost is one in which payment
is actually made between two parties as a result of a contract or agreement (State University of New York/Oswego, 2003). An implicit cost on the other hand, is a cost
in which no money is exchanged, but costs are measured in other ways. One example we can use to illustrate these two
costs involves opening a business (State University of New York/Oswego, 2003). If a person borrows money from a bank in an effort to obtain capital to open a business, interest
payments on the loan would be considered an explicit cost (State University of New York/Oswego, 2003). But if that same person decides to use his savings to finance the capital
instead, he would not have to pay interest to someone else for use of the funds (State University of New York/Oswego, 2003). This individual would not get off scot-free however.
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