EC 201 Lecture Notes - Lecture 10: Vehicle Insurance, Diminishing Returns, Marginal Cost
Document Summary
Explicit cost = a direct payment made to others in the course of running a business, such as wage, rent and materials. Implicit costs = any cost that has already occurred but is not necessarily shown or reported as a separate expense. It represents an opportunity cost that arises when a company allocates internal resources toward a project without any explicit compensation for the utilization of resources. Economic cost = explicit cost + implicit cost. Accounting profit = total revenue - explicit costs. Economic profit = total revenue - economic costs. Rearrange: profit = profit = total revenue - costs. Total revenue - explicit costs - implicit costs. Imagine you worked last summer to help pay for tuition. Last summer, you worked at a fast-food restaurant and earned . This summer, you plan to work as a painter and will earn . To do the painting job, you have to spend on supplies.
