What are a Firm's Opportunity Costs of Production?

The opportunity cost of production for a firm is equal to its 'explicit costs + implicit costs'.

Here's a breakdown:

• Explicit costs are the direct, out-of-pocket expenses a firm incurs, like wages, rent, and raw materials.
• Implicit costs are the opportunity costs of using the firm's own resources, such as the owner's time and the value of the owner's capital invested in the business. These are not actual cash payments but represent the value of the resources that could have been used elsewhere.

Therefore, the total opportunity cost of production encompasses both the explicit expenses and the implicit costs associated with using resources for production.