Question

What are explicit cost and explicit revenue?

What are implicit cost and implicit revenue?

Give examples of how to calculate total product (total output) and marginal product.

Answer 1

1)

Explicit cost: It is out of pocket expenses of producer to start their business. Example: Rent, labor, machinery etc.

Explicit revenue: This is the type of revenue generated using tangible assets which rises as business rises and can easily be determined.

2)

Implicit cost: It shows opportunity cost of your time when you do not work for yourself. Assume you left $10,000 salary to start your own business. This $10,000 is implicit cost which is not recorded by an accountant.

Implicit revenue: This is the type of revenue which cannot be easily recorded as it is generated from non monetary transactions.

3) Total product is the total output produced by a firm at various combinations of labor hired. Marginal output is the additional total output when labor hired rises by one.