What is the difference between an explicit cost and implicit

What is the difference between an explicit cost and implicit cost? What is the difference between normal profit and economic profit? How does this all relate to the entrepreneur\'s \"opportunity costs?\"

Solution

Implicit Cost

Explicit Cost

They are not measurable for accounting purpose.

These are measurable for accounting purpose.

No cash is exchanged.

Costs are paid with company tangible assets.

These are termed as opportunity costs.

These are actual costs incurred.

Normal Profits are termed as when the revenue and cost difference is 0.

If the profits are greater than normal profits than it is termed as economic profit. Economic profit also considers opportunity cost of an organization.