* Costs of production = opportunity costs of output of goods and services * Explicit costs = input costs that require outlay of money by firm * i.e. $1000 spent on flour = opportunity cost of $1000 because can’t be spent elsewhere * Implicit costs = input costs that do not require outlay of money by firm * i.e. working as baker at $10/hour, but could be making $20/hour as a computer analyst * Economists include both costs, while accountants often ignore implicit costs * Important implicit cost = opportunity cost of capital