Final answer:
The foregone rent on office space owned and used by the firm is an example of an implicit cost, representing potential income not earned.
Step-by-step explanation:
When assessing the costs associated with running a firm, there are explicit costs and implicit costs. Explicit costs are tangible and out-of-pocket payments, such as salaries for employees or rent for office space. Implicit costs, however, represent the opportunity cost of utilizing resources the firm already owns but aren't directly paid for.
An example of an implicit cost would be the foregone rent on office space owned and used by the firm, as it represents potential income that is not realized because the space is used for the firm's operations instead of being rented out.
An implicit cost is any cost that has already occurred but not necessarily shown or reported as a separate expense. It represents an opportunity cost that arises when a company uses internal resources toward a project without any explicit compensation for the utilization of resources. This means when a company allocates its resources, it always forgoes the ability to earn money off the use of the resources elsewhere, so there's no exchange of cash. Put simply, an implicit cost comes from the use of an asset, rather than renting or buying it.