Implicit Cost
Plain definition
The opportunity cost of inputs a firm already owns or supplies itself — no cash changes hands, but value is forgone.
In economics
Implicit costs include the owner's forgone salary, the interest forgone on capital invested in the business, and the rent forgone on a building the firm owns. They are invisible in accounting records but essential in economics: subtracting both explicit and implicit costs from revenue gives economic profit.
Example
An owner who quits a 90,000 implicit cost — the salary she gives up.
Common confusion
Implicit cost is confused with sunk cost. A sunk cost is already spent and irrecoverable; an implicit cost is an ongoing forgone opportunity (the salary you keep giving up each year). Rational decisions ignore sunk costs but must count implicit costs.