AP Microeconomics Block 2B – Ryan Higgins
Implicit and Explicit Costs
 Implicit Costs are not involved in an outlay of money,
they are measured by the benefits that you could’ve
had in terms of dollars.
 Explicit Costs are costs that actually require an outlay
of money.
Profit=
Total Revenue - Total Costs
Total Revenue – Explicit Cost =
Accounting Profit
Total Revenue – Opportunity Cost
(Explicit and Implicit Costs) =
Economic Profit
Accounting Vs. Economic Profit
Normal Profit
 When a firm is making an economic profit of zero, it is
making a Normal Profit
 A firm making a normal profit is making just enough
money to keep it using its resources in its current
activity.
Relationship to other topics…
 Profits have to do with everything involved with
business. If I could relate my topic to one specific
other, it would be the profit maximizing point,
MR=MC
 When a firm is functioning at a point where their
Marginal Revenue Curve is intersecting their Marginal
Cost Curve, they are in a good position to maximize
their profits.
 Profits can also relate to “Costs.”
 Implicit and Explicit costs have everything to do with
profits
 The more costs that a firm has, the more total revenue
they need to make to keep their business going
Economic Art
Real World Links
 http://online.wsj.com/article/SB1000142405297020455
5904577168594213889980.html
 http://online.wsj.com/article/BT-CO-20120118-
716012.html