Question

Implicit costs are defined by economists as nonmonetary opportunity costs. Why is it important for a firm to take these costs into consideration when evaluating a potential activity, when they don’t involve any monetary expense?

Please TYPE 5 Sentences Minimum.

Answer 1

Firstly let us try to know the meaning of the implicit cost. it is an opportunity cost which is always present but not shown in records.

every firm must take implicit cost into the consideration due to the following reasons-

1. It provides a basic root for any organization for growth, let's take an example for this. Suppose in a company which hired20 new employees and before joining final into the job, they must need training of 3 months. The company will give them training but this training cost and time will come under implicit cost but they are very important for better performing for the company

2. It is generally nonmonetary and opportunity cost. For example, suppose a gym trainer who gives training at home but when he finds a new better job then he quits his home training job for opportunity cost from the new job