Question

Answer the following question briefly:
Define implicit cost. How is it different from explicit cost?

Answer 1

Implicit cost refers to the expenditure incurred on the use of self-owned inputs.

Explicit cost refers to the expenditure incurred by the producer on the purchase pf inputs from the market.

The main difference between the two types of costs is that implicit costs are opportunity costs, while explicit costs are expenses paid with a company's own tangible assets. This makes implicit costs synonymous with imputed costs, while explicit costs are considered out-of-pocket expenses.