Distinguish between the following:
a) Explicit costs and implicit costs
b) Private cost and Social cost
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Explicit costs are out-of-pocket costs, that is, payments that are actually made. Wages that a firm pays its employees or rent that a firm pays for its office are explicit costs. Implicit costs are more subtle, but just as important. They represent the opportunity cost of using resources already owned by the firm.
Private costs are paid by the firm or consumer and must be included in production and consumption decisions. ... Social costs include both the private costs and any other external costs to society arising from the production or consumption of a good or service.
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