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 ?
This is coupled with asset managers' unwillingness to disclose all the explicit and implicit costs attached to each investment: "it is near impossible for investors to figure out how much their investments are costing them because additional costs are hidden and too high".
Investors trading in ETFs need to take account of the implicit costs associated with premiums and discounts.
As Daniel points out, there are a number of explicit and implicit costs and benefits to be weighed in PRT decisions.
Mobile money may alleviate these challenges by reducing the time and costs associated with receiving remittances, although the benefits are countered by implicit costs to the sender.
The issue price is set at a rate that captures much of the cost of buying and storing the wheat, but there are implicit costs that are not fully captured.
For its part, global trade is well established as a positive sum game for all countries open to it, but it clearly does not come without explicit and implicit costs. The happy state in which most UK citizens find themselves today, with life expectancy, mortality and morbidity among the indicators continuing to move in the right direction, is in large part down to our openness to trade.
The implicit costs of government-provided deposit insurance are real economic costs borne by taxpayers, borrowers, lenders, and counterparties.
Indeed, where an explicit money cost is part of what is foregone, examples may reinforce the fact that opportunity cost also includes additional implicit costs such as the value of time.
It provides a matrix of these costs, divided vertically into nonmonetary and economic costs, and horizontally into direct costs, implicit costs and spillover costs.
On the one hand, less equipment is needed, resulting in lower implicit costs (purchase, maintenance, servicing, energy consumption, etc.), on the other hand the centralized management of the network contributes to savings as well."
As an example, an MBA student is more likely to understand implicit costs, such as the opportunity cost of an entrepreneur's time, since it is very possible that she has already calculated this for herself.
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."