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September 22, 2018 

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IMPLICIT COST: An opportunity cost that does NOT involve a money payment or a market transaction. This should be contrasted with explicit cost that DOES involve a money payment or a market transaction. The common misconception among non-economists out there in the real world is that the term "cost" is synonymous with the term "payment," that is, all costs are explicit costs, to be a cost you have to give up some money. Well, I'm here to tell you that this isn't true. Cost is opportunity cost. It's the satisfaction NOT received from activities NOT pursued. It's the value of foregone production. And not all opportunity costs involve a money payment.

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GOVERNMENT ENTERPRISES:

Government owned and operated productive activities that operate much like private sector firms. They hire resources and purchase other inputs, then produce goods sold through markets. In some cases, government enterprises compete directly with private firms. One common example of a government enterprise is a city-operated electrical generation and distribution system. In some cities, this service is provided by private, for-profit, businesses. In other cities it is provided by government. Other examples of government enterprises include urban transportation systems, parks and recreational facilities, and communication systems.
The primary difference between private firms and government enterprises, especially in the National Income and Product Accounts, is the treatment of profit. In a private firm, any profit generated (the difference between revenue and cost) is claimed by the owners, or the entrepreneurs. A government enterprise, in contrast, has NO specific owners to claim the profit. In essence, the enterprise is owned by ALL citizens. As such, the "profit" of government enterprises is not earned by any specific factor of production.

From a practical standpoint, the excess of revenue over cost for a government enterprise, which is termed "surplus" rather than profit, is merely returned to the appropriate government treasury. Should the city's electric utility "turn a profit" in a given year, this surplus is given back to the city. This is fitting because should the electric utility incur a loss, then the city makes up the difference.

<= GOVERNMENT CONSUMPTION EXPENDITURES AND GROSS INVESTMENTGOVERNMENT EXPENDITURES =>


Recommended Citation:

GOVERNMENT ENTERPRISES, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: September 22, 2018].


Check Out These Related Terms...

     | national income and gross domestic product | national income and net domestic product | government subsidies less current surplus of government enterprises | government subsidies | current surplus of government enterprises | capital consumption adjustment | indirect business taxes | net foreign factor income | business transfer payments | statistical discrepancy |


Or For A Little Background...

     | national income | gross domestic product | gross domestic product, income | production | product markets | National Income and Product Accounts | Bureau of Economic Analysis | National Bureau of Economic Research | enterprise | business |


And For Further Study...

     | factor payments | circular flow | business cycles | gross domestic product, expenditures | gross domestic product, ins and outs | gross domestic product, welfare | gross national product | real gross domestic product | government functions | net domestic product | personal income | disposable income | gross domestic income |


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