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<!doctype html><html class=html lang=en-us dir=ltr><head><meta charset=utf-8><meta name=viewport content="width=device-width"><title>Unit 5 | Freedoms4</title><link rel=stylesheet href=/css/style.min.34d0accb85f8ec23ceee8c29eef5907823b531d8acb9e6bdf45a3b37ad028d30.css integrity="sha256-NNCsy4X47CPO7owp7vWQeCO1Mdisuea99Fo7N60CjTA=" crossorigin=anonymous><link rel=icon href=/favicon.ico><meta name=description content=" May 01, 2026 # Explicit Cost # Explicit costs are direct, out-of-pocket payments that a business or individual makes for the use of resources or services. These costs are tangible, measurable, and recorded in accounting books, including expenses like rent, utility bills, wages, raw materials, and interest on borrowed capital.
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Implicit Cost # Implicit costs are not directly paid out or recorded in financial statements, but represent the opportunity costs of using resources owned by the firm or individual. Examples include the forgone salary if an entrepreneur works in their own business instead of being employed elsewhere, or the interest income sacrificed by investing personal funds in the business rather than elsewhere."><meta property="og:url" content="https://freedoms4.org/uninotes/s1/et-dcm1107/unit5/self/"><meta property="og:site_name" content="Freedoms4"><meta property="og:title" content="Unit 5"><meta property="og:description" content="May 01, 2026 # Explicit Cost # Explicit costs are direct, out-of-pocket payments that a business or individual makes for the use of resources or services. These costs are tangible, measurable, and recorded in accounting books, including expenses like rent, utility bills, wages, raw materials, and interest on borrowed capital.
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Implicit Cost # Implicit costs are not directly paid out or recorded in financial statements, but represent the opportunity costs of using resources owned by the firm or individual. Examples include the forgone salary if an entrepreneur works in their own business instead of being employed elsewhere, or the interest income sacrificed by investing personal funds in the business rather than elsewhere."><meta property="og:locale" content="en_us"><meta property="og:type" content="article"><meta property="article:section" content="uninotes"><meta itemprop=name content="Unit 5"><meta itemprop=description content="May 01, 2026 # Explicit Cost # Explicit costs are direct, out-of-pocket payments that a business or individual makes for the use of resources or services. These costs are tangible, measurable, and recorded in accounting books, including expenses like rent, utility bills, wages, raw materials, and interest on borrowed capital.
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Implicit Cost # Implicit costs are not directly paid out or recorded in financial statements, but represent the opportunity costs of using resources owned by the firm or individual. Examples include the forgone salary if an entrepreneur works in their own business instead of being employed elsewhere, or the interest income sacrificed by investing personal funds in the business rather than elsewhere."><meta itemprop=wordCount content="332"><meta itemprop=keywords content="S1,ET DCM1107"><link rel=stylesheet href=/css/custom.css><script>(function(){var e=localStorage.getItem("theme");e&&document.documentElement.setAttribute("data-theme",e)})()</script><script async src=https://plausible.freedoms4.org/js/pa-5BKl0z0RLzwrclKq4y-qk.js></script><script>(window.plausible=window.plausible||function(){(plausible.q=plausible.q||[]).push(arguments)},plausible.init=plausible.init||function(e){plausible.o=e||{}}),plausible.init()</script></head><body class=body><header class=header><div class=brand><img src=/logo.png alt="Freedoms4 logo"><h1>Freedoms4</h1><div class=brand__actions><button class=theme-toggle id=theme-toggle aria-label="Toggle theme" title="Toggle dark/light mode">
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› <a href=/uninotes/s1/et-dcm1107/>ET DCM1107</a>
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› <a href=/uninotes/s1/et-dcm1107/unit5/>Unit 5</a>
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› <span>Self</span></nav><div class=uninotes-meta><span class=uninotes-meta__pill>S1</span>
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<span class=uninotes-meta__pill>ET DCM1107</span>
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<span class="uninotes-meta__pill uninotes-meta__pill--self">Self</span></div><h1>Unit 5</h1><details class=toc><summary class=toc__summary>Table of Contents</summary><nav id=TableOfContents><ul><li><ul><li><a href=#may-01-2026><em><strong>May 01, 2026</strong></em></a></li></ul></li><li><a href=#explicit-cost>Explicit Cost</a></li><li><a href=#implicit-cost>Implicit Cost</a></li><li><a href=#ecnonomic-profit>Ecnonomic Profit</a></li><li><a href=#short-run-costs>Short Run Costs</a></li><li><a href=#different-types-of-cost>Different types of Cost</a></li><li><a href=#cost-function>Cost Function</a></li><li><a href=#total-cost>Total Cost</a></li><li><a href=#average-cost>Average Cost</a></li><li><a href=#marginal-cost>Marginal Cost</a></li></ul></nav></details><h3 class=heading id=may-01-2026><em><strong>May 01, 2026</strong></em><span class=heading__anchor> <a href=#may-01-2026>#</a></span></h3><h2 class=heading id=explicit-cost>Explicit Cost<span class=heading__anchor> <a href=#explicit-cost>#</a></span></h2><p>Explicit costs are direct, out-of-pocket payments that a business or individual makes for the use of resources or services. These costs are tangible, measurable, and recorded in accounting books, including expenses like rent, utility bills, wages, raw materials, and interest on borrowed capital.</p><h2 class=heading id=implicit-cost>Implicit Cost<span class=heading__anchor> <a href=#implicit-cost>#</a></span></h2><p>Implicit costs are not directly paid out or recorded in financial statements, but represent the opportunity costs of using resources owned by the firm or individual. Examples include the forgone salary if an entrepreneur works in their own business instead of being employed elsewhere, or the interest income sacrificed by investing personal funds in the business rather than elsewhere.</p><h2 class=heading id=ecnonomic-profit>Ecnonomic Profit<span class=heading__anchor> <a href=#ecnonomic-profit>#</a></span></h2><p>Economic Profit = Total Revenue − (Explicit Costs + Implicit Costs)</p><h2 class=heading id=short-run-costs>Short Run Costs<span class=heading__anchor> <a href=#short-run-costs>#</a></span></h2><p>The short run refers to a time period in which at least one factor of production (such as capital, plant size, or equipment) is fixed and cannot be easily altered. During this period, firms face two types of costs:</p><ul><li>Fixed Costs (FC): These are expenses that do not change with output—such as factory rent, salaried staff, or depreciation of machinery. They remain constant regardless of the level of production.</li><li>Variable Costs (VC): These costs fluctuate with the level of output produced, including raw materials, hourly wages, energy, and packaging. As output increases, variable costs rise; as output falls, they decline.</li></ul><p>Total Cost (TC) = Fixed Cost (FC) + Variable Cost (VC)</p><h2 class=heading id=different-types-of-cost>Different types of Cost<span class=heading__anchor> <a href=#different-types-of-cost>#</a></span></h2><p>A) Real Cost<br>B) Economic Cost<br>C) Accounting Cost<br>D) Social Cost<br>E) Private Cost<br>F) Opportunity Cost<br>G) External Cost<br>H) Replacement Cost</p><h2 class=heading id=cost-function>Cost Function<span class=heading__anchor> <a href=#cost-function>#</a></span></h2><p>𝐶 = 𝐹 + 𝑉(𝑄)<br>where F is the fixed cost, and V(Q) is the variable cost depending on the output level Q</p><h2 class=heading id=total-cost>Total Cost<span class=heading__anchor> <a href=#total-cost>#</a></span></h2><p>TC = Total Fixed Cost (TFC) + Total Variable Cost (TVC)</p><h2 class=heading id=average-cost>Average Cost<span class=heading__anchor> <a href=#average-cost>#</a></span></h2><p>AC = TC / Quantity (Q)</p><h2 class=heading id=marginal-cost>Marginal Cost<span class=heading__anchor> <a href=#marginal-cost>#</a></span></h2><p>TC = Change in Total Cost / Change in Quantity</p><nav class=page-nav><a class=page-nav__previous-link href=/uninotes/s1/et-dcm1107/unit2/>← Unit 2</a>
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