In determining cost economics considers

In determining cost, economics considers both implicit and explicit costs. Explicit costs refer to the actual monetary payments made for goods, services or resources purchased in the market. Implicit costs, on the other hand, are the opportunity costs of using resources owned by the firm or individual, such as the foregone earnings from using owner’s capital or the value of owner’s time spent working for the business. Thus, economics takes into account both explicit and implicit costs when determining the true cost of producing a good or service.