Alright, so when we talk about cost, we're talking about the inputs, right? What does it cost us to create this output? What is the cost of the inputs into the production, right? And when we talk about cost, right? The revenues were the benefits to the firm? Well, the costs are going to be the costs to the firm, right? That sounds a little redundant, but right, we've been talking about benefits and costs pretty much throughout every unit that we've done in this course. So here I'm just clarifying that the benefits are going to be that revenue, and the cost is going to be the cost, right? So right now, we're going to define the cost between this explicit and implicit, okay? But after we do this, because we're going to do it this way to be able to calculate profit in certain ways, but after we do it this way, we're going to start talking about the cost in a different way. The reason we're doing this is that it's very common, easy exam questions where they ask us to calculate certain types of profit, accounting profit, and economic profit. And to do that, we need to talk about explicit and implicit costs. But like I said, after we learn how to calculate profit like this and do some practice, we're going to talk about costs in a whole different way again, alright? So this is one way to look at costs, and let's start here with explicit cost. So, an explicit cost is a cost that involves spending money, alright? So you're going to explicitly have this cost, right? Explicit is out in the open, right? And that's what explicit means, so you can tell how much this cost is, right? Because you're literally handing over money. So it's very easy to see that this cost exists because you've handed over money for it. Compare that to an implicit cost, right? It says here that they're non-monetary. These are going to be opportunity costs, right? Where there's no money being exchanged, you're not actually handing over money, but it is an opportunity cost, it's an opportunity that you gave up because you made this decision, right? Now, a quick note that these explicit costs, these are also opportunity costs, right? Because you had that money that you spent, right? You explicitly spent some money on something, but you could have spent that money on something else, right? So the opportunity cost there is that that money could have been spent somewhere else. So everything here is an opportunity cost, it's just that the implicit ones don't have actual money being spent. So let's talk about some examples about what is going to be this explicit or implicit cost, right? So we're going to talk about the idea of Elon Musk, right? The CEO of Tesla and SpaceX, he's a smart dude, and he's making tons of money, but what we didn't know about him is that he didn't care about all this tech stuff, all he ever wanted to do was open a bakery and just make some cakes, right? But instead, he started Tesla, he's exploring space, but in the back of his head, he's always thinking man, I wish I started that bakery. And now all of a sudden he's like, you know what, forget it all, I'm going to start the bakery. So what are some of the explicit costs that Elon Musk is going to have when he opens up Elon Musk cakes? Right? Well, he's going to have some standard stuff that he's going to spend money on like sugar for the cakes and flour, right? These kinds of standard things, right? You're going to see him spending money, right? He has to pay money for these things. He's going to have to pay wages, right? To his employees and rent, right? He's going to pay rent for something like that on the building that he's renting, right? These are all explicit because he's spending money, you can actually see the money going out, right? Compare that to some implicit costs of his business. So to him, one of the opportunity costs was this salary that he was making as CEO, right? He was making a salary as CEO of Tesla, and now he gave up that salary to start his bakery, right? So that salary is an implicit cost of this business. He gave up the opportunity to earn that salary when he opened the bakery, right? So he's going to have to consider that as an implicit cost of his business. Another very common one that they like to use in their examples is foregone interest. So foregone interest, when you buy capital investment. So let's say, Elon Musk had $300,000 in the bank that he took out to buy equipment, right? To bake his cakes. He bought ovens, he bought all sorts of equipment for his bakery, well that $300,000 that he took out of the bank, it was earning interest in the bank, right? There was some interest rate, and he was getting some money in interest for having that saved up. Now, when he took it out of the bank, he's no longer earning that interest, right? So he gave up that interest to start this business. So these are two of the most common implicit costs you're going to see, when you have to do practice problems is that this person is usually going to be skilled at something else, so they gave up a salary and when they start the business, they're going to have to take money out of savings, they're going to have to give up some interest, right? So that's what you're going to see generally when we talk about the implicit cost. Explicit costs are usually easier to see, right? It's going to be things that they're just spending money on. Cool? So a quick note here about these implicit costs before we move on is that there is a number amount, right? There was a dollar amount of his salary, right? Maybe he was making $300,000 as the CEO of Tesla that he gave up, but remember it's non-monetary. He didn't have to pay someone $300,000 when he quit the job and started the bakery, right? It's an opportunity cost because he didn't have to actually give up money for it, but it is something that he gave up not necessarily in cash. Cool? So let's go ahead and move on to the next video where we're going to define the different types of profit that we're going to be calculating. Cool. Let's do that now.