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An explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials, [1] as opposed to implicit costs, where no actual payment is made. [2] It is possible still to underestimate these costs, however: for example, pension contributions and other "perks" must be taken into account when ...
In economics, an implicit cost, also called an imputed cost, implied cost, or notional cost, is the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent. It is the opposite of an explicit cost, which is borne directly. [1]
The comparison includes the gains and losses precluded by taking a course of action as well as those of the course taken itself. Economic cost differs from accounting cost because it includes opportunity cost. [3] [2] [4] (Some sources refer to accounting cost as explicit cost and opportunity cost as implicit cost. [2] [4])
In accounting, there is a different technical concept of cost, which excludes implicit opportunity costs. In common usage, as in accounting usage, cost typically does not refer to implicit costs and instead only refers to direct monetary costs. The economics term profit relies on the economic meaning of the term for cost.
An accountant measures the firm's accounting profit as the firm's total revenue minus only the firm's explicit costs. An economist includes all costs, both explicit and implicit costs, when analyzing a firm. Therefore, economic profit is smaller than accounting profit. [3] Normal profit is often viewed in conjunction with economic profit ...
The cost of tax expenditures varies from year to year with the level of economic activity, though changes tend to be modest. [6] The Congressional Budget Office (CBO) estimated that U.S. tax expenditures in fiscal year 2019 totaled $1.6 trillion (7.8% of gross domestic product). [2]
Governmental responses to the COVID-19 epidemic have resulted in considerable economic and social consequences, both implicit and apparent. Explicit costs are the expenses that the government incurred directly as a result of the pandemic which included $4.5 billion dollars on medical bills, vaccine distribution of over $17 billion dollars, and ...
MEC tells us the cost of raising $1 of tax through the use of different types of tax. For example: if capital tax has a MEC of $0.50 then it costs the government $0.50 to collect $1 from capital taxes. Marginal efficiency cost of taxes can help policymakers to decide what to implement taxes on by pursuing taxes with a low MEC.