Difference Between Explicit And Implicit Cost

Explain the difference between implicit and explicit costs. Give two examples of when an explicit cost is different from an implicit cost.

The difference between implicit and explicit costs are that: explicit costs are the costs that the firms surely have to pay from their pockets or bank accounts, no matter what their business situations are either facing certain challenges or financial up and downs. Explicit costs can be identified as office rental cost, staff wages, utility bills, monthly internet and phone bills, insurance costs, office furniture costs, office stationeries costs, commercial tax 5% in our country (just for example) and printers, scanners and also copier purchasing costs for a firm. These costs normally go into firm’s fixed

Also this method is to develop the production process, to produce the quantity of output to be at increasing level for each and every unit, while also trying to lower the costs for each and every unit at the same time, with Long Run Average Cost (LRAC). This very great method was existed long time ago, and many factories and manufacturing companies are using this to gain Economies of Scale to maximize their profit margins. One firm can adopt this great method for their maximum output efficiency. For example, when Hong Kong based Garments Manufacturing Company is using this method with Long Run Average Cost (LRAC) to produce and distribute their products into the global markets by achieving Economies of Scale to be very competitive. This method only can be used with Long Run Average Cost (LRAC) in order to achieve the Economies of Scale, by negotiating and settling the agreements with their several tiers suppliers to lower the costs of acquiring the raw fabrics, related equipment costs, logistics costs and also employing several general workers with long term contracts, inside their factory to maximize their output to achieve the greater efficiency of production and profits in the long run. But this method cannot be used with Short Run Average Cost (SRAC) to achieve the Economies of Scale, because it is not possible to lower the high fixed costs and variable costs in the Short