DIFFERENCE BETWEEN EXPLICIT COST AND IMPLICIT COST
Definition of Explicit Cost
It refers to the expenditure incurred by the producer to buy the inputs from the market. For example, the purchase of raw material, labor from the market, etc.
It can be measured as the cash payments that a firm makes to others for the purchase of inputs in the market. These are also known as Out Pocket costs. The explicit costs can be determined easily in the market and require cash physical outflow of cash. Therefore, these are the costs that are considered while calculating accounting profit as well as economic profit…..
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