Asked by Kristine Mae Almodiel on May 04, 2024
Verified
What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?
Opportunity Costs
Represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.
Explicit Costs
Direct, out-of-pocket payments for inputs or resources used in the production of goods or services, such as wages for labor, rent for offices, or materials for production.
Implicit Costs
Implicit costs are the opportunity costs of using resources that a company already owns, representing the potential income lost by not utilizing them elsewhere.
- Analyze the difference between explicit and implicit costs and their role in determining economic and accounting profits.
- Understand the concept of opportunity costs and their role in decision-making.
Verified Answer
PB
Patrick BatemanMay 05, 2024
Final Answer :
The opportunity cost of an item refers to all those things that must be forgone to acquire that item. Both explicit and implicit costs are included as opportunity costs.
Learning Objectives
- Analyze the difference between explicit and implicit costs and their role in determining economic and accounting profits.
- Understand the concept of opportunity costs and their role in decision-making.