option of doing something else. If something could not be done simultaneously
like using a limited capital to either spend on building another store or to
use it for advertising. Both of these should produce a much bigger revenue but
only the best possible alternative can be done. If they chose to build a new
store instead of boosting awareness through ads, the second option is a lost
opportunity that might have produced a better result.
are physical costs where the company uses money
to produce their products like raw materials, rent, machinery and equipment.
Accountants use explicit costs to determine the company's profit.
is where time and effort is being diverted into
something else that might represent a wasted opportunity. Economists include
implicit cost together with explicit cost to determine economic profit. Depreciation
is an example of implicit cost where the market value of capital changed because
of an economic event, where it could have been put into more use when the value
was still high.