An explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials, as opposed to ''

implicit cost 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 i ...

s'', where no actual payment is made. It is possible still to underestimate these costs, however: for example, pension contributions and other "perks" must be taken into account when considering the cost of labour. Explicit costs are taken into account along with implicit ones when considering

economic profit In economics, profit is the difference between revenue that an economic entity has received from its outputs and total costs of its inputs, also known as surplus value. It is equal to total revenue minus total cost, including both explicit an ...

. Accounting profit only takes explicit costs into account.

References

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