Question

The concept of opportunity cost is an important one in economics. It is essential to understand the distinction between explicit and implicit costs. For this assignment, consider an event at work that you company is considering doing, such as a new product, adding more employees, etc. their opportunity cost of going to school is. Include all implicit and explicit costs of this venture. In addition, analyze the value of this project and how the costs will be short run and the long run.

Submit a 4-page essay, using the writing template, and a minimum of 5 references.

Answer 1

Let’s consider a pharma company which is planning to work on a new product or drug which shares little bit of similarity with the earlier projects, hence it enjoys the support of subject matter experts.

In this new proposal, implicit and explicit costs would be involved. Let’s understand the explicit costs involved-

Explicit costs-

Extra salary for additional Manpower-Though subject matter expertise would be available but additional full time employees (FTE) would be required to execute the new process. Certainly it will incur the extra cost in few more areas such as new

Raw materials, taking help of consultant in case if any issue is beyond the capability of in-house experts. Like this few more factors are there which may come along while new product is being developed.

Implicit Costs-

Implicit costs would be supporting the business run cost on daily basis. In addition to it, other costs which would be factored in for implicit costs would be small investments within the work for R&D expenses and daily review of the projects.

While considering the long term impact of this project, short run costs would be the total cost incurred until the final product is ready meeting to all the product specifications, while the long term costs would be support to clinical trials and all the other investigative review of the product until the market authorization.