Social Sciences and History / Unit 13 SSH 1228 short lesson, about 20 seconds
Explicit, Implicit, Accounting, Economic
Captions available
The idea
Profit is revenue minus cost, but two costs exist. Explicit costs are out-of-pocket payments: wages, rent, materials. Implicit costs are the opportunity cost of resources the firm already owns and uses. Accounting profit subtracts only explicit costs; economic profit subtracts both.
In practice
An owner's forgone salary as an implicit cost.
Where people slip
Zero economic profit still covers the owner's best alternative.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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