Difference Between Implicit And Implicit Cost

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Explain the difference between implicit and explicit costs. Give two examples of when an explicit cost is different from an implicit cost. The easier one to explain by far is explicit cost. Costs that a company will pay, whether it be for wages, rent, items that need to be purchased to run the company, etc. are out-of-pocket expenses. These items are easily placed in the financial books as expenditures. Implicit costs tend to be harder to differentiate. These costs aren’t necessarily placed in the financial books. They are costs that don’t necessarily have money involved, therefore there is no need to place them into the financials. “A business doesn't record implicit costs or transactions for accounting purposes because no money is changing hands” (Lister, n.d). Let me …show more content…
These usually happen when there are multiple issues before that item gets on the shelf. For example, this would include poor communication, poor organizational skills, low motivation, even something as simple as bad decisions. Bad decisions are a pretty broad area, so I will elaborate to my thoughts. If I were a manager of a car dealership. I would be interviewing for a sales position. I have my choice of two candidates. There is one person that is very knowledgeable about cars (as he was a car salesman at another dealership) and then there is someone that has no previous experience but is drop-dead gorgeous. Most people would think that the drop-dead gorgeous person would create more revenue because, well… the person is gorgeous, so that person gets hired. While I understand the concept, because there are numerous jobs that look for “looks”. The person who has the actual knowledge with the vehicles, their extra options, how they work, etc. would obviously be the better choice, but most people don’t think that