Question

It's quite possible that there are many people in business who do not consider their implicit costs. if so, what effect do you think is likely to have on the nation's economic efficiency?

Answer 1

If the businesses do not consider their implicit cost into account, then it will have a negative impact on the nation's economic efficiency because the business will keep on producing the good without taking into consideration implicit cost and thus total cost used to produce the good will decline. This will not lead to optimum results because there is hidden implicit cost in the production process. Thus, the output produced will not be optimum as total cost has a missing component and thus results are not optimum. This leads to the fall in the nation's economic efficiency.