Production Theory

Production theory looks at how businesses can most effectively combine labor and capital to achieve maximum efficiency. This can help firms increase output whilst also reducing output, thereby increasing profits.

Explicit and Implicit Costs Definition

Explicit and Implicit Costs: Definition & Examples

An explicit cost is the clearly stated costs that a business incurs. For example, employee wages, inputs, utility bills, and rent, among others. These are the costs which are stated on the businesses balance sheet.

By contrast, implicit costs are those which occur, but are not seen. In other words, these are the costs that are not directly linked to an expenditure. For example, a factory may close down for the day in order for its machines to be serviced.