Explicit+Costs


 * EXPLICIT COSTS:** An explicit cost is easily accountable cost such as rent, wages, and materials. They are the costs that reflect what an entrepreneur must pay out of his own pocket, and is measured in monetary value. To accountants, explicit costs also equal total cost. However, economists believe that explicit costs are only a portion of the total cost of a business. There are also implied costs that reflect what the entrepreneur could have been making if they were doing something else.

Because everything you use money to pay for in the world is an explicit cost, often times people are unable to realize that these implicit costs exist. Therefore, explicit costs can create a type of disillusionment in how we perceive profit. The economic way says that a profit is when total revenue exceeds both explicit costs and normal profits. But accountants only take in explicit costs. Certain companies therefore could either undergo a accountant profit or an economic loss with the same information depending on how they view costs.

Electricity is a great example of an explicit cost. Every month you get a bill charging you for however much electricity you use and you have to pay that money out of you wallet or bank account or wherever.

Which of the following is not an example of an explicit cost? A) rent B) workers' salaries C) opportunity costs D) utilities

media type="youtube" key="iTwqaE9__rU" height="344" width="425" This video gives a great explanation of what explicit costs are and how they relate to economics.

Other sites: http://en.wikipedia.org/wiki/Explicit_cost http://www.investopedia.com/terms/e/explicitcost.asp http://www.businessdictionary.com/definition/explicit-cost.html

Answer to sample question: C