Editing Opportunity cost (section)

==Types==

===Explicit costs===
[[Explicit cost]]s are the direct costs of an action (business operating costs or expenses), executed through either a cash transaction or a physical transfer of resources.<ref name=":2" /> In other words, explicit opportunity costs are the out-of-pocket costs of a firm, that are easily identifiable.<ref name=":3">{{cite web|date=2016|title=Explicit and implicit costs and accounting and economic profit|url=https://www.khanacademy.org/economics-finance-domain/microeconomics/firm-economic-profit/economic-profit-tutorial/a/explicit-and-implicit-costs-and-accounting-and-economic-profit-cnx|access-date=1 November 2020|website=Khan Academy}}</ref> This means explicit costs will always have a dollar value and involve a transfer of money, e.g. paying employees.<ref name=":10">{{cite web|title=Explicit Costs - Overview, Types of Profit, Examples|url=https://corporatefinanceinstitute.com/resources/knowledge/accounting/explicit-costs/|access-date=2021-04-30 |df=dmy-all|website=Corporate Finance Institute|language=en-US}}</ref> With this said, these particular costs can easily be identified under the expenses of a firm's income statement and balance sheet to represent all the cash outflows of a firm.<ref name=":4">{{cite web|date=5 February 2020|title=Explicit Costs: Definition and Examples|url=https://www.indeed.com/career-advice/career-development/explicit-cost|access-date=1 November 2020|website=Indeed}}</ref><ref name=":10" />

Examples are as follows:<ref name=":3" /><ref name=":5">{{cite journal|last1=Crompton|first1=John L.|last2=Howard|first2=Dennis R.|date=2013|title=Costs: The Rest of the Economic Impact Story|url=http://pdfs.semanticscholar.org/ca98/7798f556cac60a1fb81204c0a04f4b8ca697.pdf|archive-url=https://web.archive.org/web/20190304215502/http://pdfs.semanticscholar.org/ca98/7798f556cac60a1fb81204c0a04f4b8ca697.pdf|url-status=dead|archive-date=2019-03-04 |df=dmy-all|journal=Journal of Sport Management|volume=27|issue=5|pages=379–392|doi=10.1123/JSM.27.5.379|s2cid=13821685}}</ref>

* Land and infrastructure costs
* Operation and maintenance costs—wages, rent, overhead, materials

Scenarios are as follows:<ref name=":4" />

* If a person leaves work for an hour and spends $200 on office supplies, then the explicit costs for the individual equates to the total expenses for the office supplies of $200.
* If a printer of a company malfunctions, then the explicit costs for the company equates to the total amount to be paid to the repair technician.

===Implicit costs===
[[Implicit cost]]s (also referred to as implied, imputed or notional costs) are the opportunity costs of utilising resources owned by the firm that could be used for other purposes. These costs are often hidden to the naked eye and are not made known.<ref name=":5" /> Unlike explicit costs, implicit opportunity costs correspond to [[intangible asset|intangibles]]. Hence, they cannot be clearly identified, defined or reported.<ref name=":4" /> This means that they are costs that have already occurred within a project, without exchanging cash.<ref name=":7">{{cite web|last=Kenton|first=Will|title=How Implicit Costs Work|url=https://www.investopedia.com/terms/i/implicitcost.asp|access-date=2021-04-30 |df=dmy-all|website=Investopedia|language=en}}</ref> This could include a small business owner not taking any salary in the beginning of their tenure as a way for the business to be more profitable. As implicit costs are the result of assets, they are also not recorded for the use of accounting purposes because they do not represent any monetary losses or gains.<ref name=":7" /> In terms of [[factors of production]], implicit opportunity costs allow for [[Depreciation (economics)|depreciation]] of goods, materials and equipment that ensure the operations of a company.<ref name=":6">{{cite web|title=Reading: Explicit and Implicit Costs|url=https://courses.lumenlearning.com/suny-microeconomics/chapter/explicit-and-implicit-costs-and-accounting-and-economic-profit/|access-date=1 November 2020|website=Lumen Learning}}</ref>

Examples of implicit costs regarding production are mainly resources contributed by a business owner which includes:<ref name=":3" /><ref name=":6" />

* [[Wage labour|Human labour]]
* [[Infrastructure]]
* Risk
* [[Time]] spent: also involves considering other valuable activities that could have been undertaken in order to maximize the [[return on time invested]]

Scenarios are as follows:<ref name=":4" />

* If a person leaves work for an hour to spend $200 on office supplies, and has an hourly rate of $25, then the implicit costs for the individual equates to the $25 that he/she could have earned instead.
* If a printer of a company malfunctions, the implicit cost equates to the total production time that could have been utilized if the machine did not break down.