What is an explicit cost? Give examples

Explicit costs include those costs for which actual payment is made to another party in the process of running a business. Examples of explicit costs include rent payments to landlords, payments to suppliers for materials, utility payments for energy consumption, and payments made to employees.

Implicit costs do not involve direct payment but rather refer to opportunity costs. For example, a business owner who owns a building can either run their business from the location or has the option to simply rent the building to someone else. The rent that could be realized is an implicit cost they are not receiving if they choose to keep running their own business.