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 ?
While taxpayers are affected in some years and not in others, they bear an implicit cost in every year because it is not known in advance when banks will default on their obligations or by how much.
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.
Dynamic Implicit Cost and Discount Window Borrowing: An Empirical Investigation.
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Second, would recognizing implicit costs have altered the pace of resolutions.
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hj~, the implicit cost of household h's time when spent producing |z.
Goodfriend extends previous work by including implicit costs which depend upon past as well as present borrowing.
Instead, I suggest exploiting the existence of the less ambiguous and controversial terms implicit cost and explicit cost.
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When the discount is considered, the implicit cost of investing in UK Select increases further.