implicit cost


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Implicit Cost

The opportunity cost of an activity. Implicit costs are what a company or individual could have earned had a different decision been made. For example, suppose an independent consultant has two clients and she spends some time working on the first client's project. The implicit costs are what the consultant would have made had she worked on the second client's project instead. Implicit costs contrast with explicit costs, which are what someone actually spends on an activity. It is also called an indirect cost.

implicit cost

or

imputed cost

the OPPORTUNITY COST to a FIRM of using resources owned by the firm itself to produce its output. For example, if a firm occupies a building that it owns, it forgoes the opportunity of renting it out for some other use. Thus, implicit costs represent the sacrifice of income that could have been earned by renting out (or selling) the firm's resources to others.

To achieve an accurate measure of the total cost of producing goods or services, the firm must impute a rent to itself using a SHADOW PRICE based upon the current market rates for renting the property See PROFIT, EXPLICIT COST.

implicit cost

or

imputed cost

the OPPORTUNITY COST to a FIRM of using resources owned by the firm itself to produce its output. For example, if a firm occupies a building that it owns, it foregoes the opportunity of renting it out for some other alternative use. Thus, implicit costs represent the sacrifice of income that could have been earned by renting out (or selling) the firm's resources to others.

To achieve an accurate measure of the total cost of producing goods or services, the firm must impute a rent to itself based upon the current market rate for renting the property See PROFIT, EXPLICIT COST, SHADOW PRICE.

References in periodicals archive ?
That forgone wages are part of the implicit cost of obtaining a college education is surely one of the most familiar of these examples to professors of introductory economics.
In addition to estimating the fixed cost of borrowing from the discount window, we are also interested in determining whether this implicit cost exhibits any gradual changes over time.
Instead, I suggest exploiting the existence of the less ambiguous and controversial terms implicit cost and explicit cost.
We may add that expense ratio is not the only cost involved in investing in an ETF but it usually is the major cost, however investors need to look at other implicit costs too in addition to expense ratio.
On the one hand, less equipment is needed, resulting in lower implicit costs (purchase, maintenance, servicing, energy consumption, etc.
At a time when implicit costs are rising dramatically, Saxo Bank's proposition can help smaller managers immeasurably on the road to becoming the titans of tomorrow.
Adjusted EBT is also closer to economic profit before tax, which is calculated after considering all explicit and implicit costs.
For the period June-December 2007, Isla incurred the following costs, divided into explicit and implicit costs (see Table 3):
Equation 2 tests the hypothesis that the WTP for a new stadium depends on the following variables: the dollar value of the bid amount (AMOUNT), the respondent's income (INCOME), the extent to which the Vikings are a public good (PUBGOOD), the prestige associated with having a new stadium (PRESTGE), the explicit and implicit costs incurred in the previous seasons by respondents who watch games either at the stadium or on television (SPEND), the belief that a new stadium will help the team win a Super Bowl (WINSUPER), the belief that the team will relocate if not given a new stadium (LEA VE), the Minnesota Twins baseball stadium drive (TWINS), a joint stadium with the University of Minnesota (UOFM), and a vector of demographic variables (Z).
Perceived utility and importance, that is the intrinsic value given to those same tasks by students, as well as perceived implicit costs, that is, the necessary efforts to complete the assignments are some relevant factors when looking at homework through a motivational lens (Warton, 2001).