Asked by pizza and spagghetti on May 01, 2024
Verified
Which of the following is an example of an implicit cost?
A) Interest paid on the firm's debt
B) Rent paid by the firm to lease office space
C) The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm
D) Wages paid to workers
Implicit Cost
The opportunity cost equal to what a firm must give up in order to use resources that it already owns without paying for them explicitly.
Firm's Debt
A firm's debt refers to the amount of money that the company owes to creditors. It is a key component of a company's capital structure.
Wall Street
A street in Lower Manhattan, New York City, known as the financial district's heart, home to the New York Stock Exchange and symbolically representing the American financial markets.
- Differentiate between explicit costs and implicit costs, including examples of each.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
C
Explanation :
Implicit costs are those that represent the opportunity costs of using resources owned by the firm for its current purposes rather than for the next best alternative use. Choice C, where the owner forgoes a salary from another job, is an example of an implicit cost because it represents the income the owner gives up to run the firm.
Learning Objectives
- Differentiate between explicit costs and implicit costs, including examples of each.