Opportunity cost vs. Fixed cost and Variable cost

CFA Level I Economics
#1

Hello All,

I am curious – in a real world, we do calculations using fixed cost and the variable cost. However, in microeconomic analysis, we always calculate the economic profit. I am curious where does the opportunity cost of being in the business go – is it fixed cost or variable cost? Example, I set up a business, when I could earn $60K from a job in corporation. Where will this $60K be reflected?

Also, fixed cost + variable cost = explicit cost + implicit cost = TC. What component of fixed cost or variable cost is the implicit cost?

Any thoughts will be greatly appreciated.

#2

Opportunity cost can be either fixed or variable theoretically. But it seems to mostly be of the fixed variety. I could see a variable opportunity cost if you’re consuming a resource that has an alternate use per unit. But it’s late and I have to set off fireworks for the kids, so I’ll give it some thought.