The implicit rental rate to a firm of owning a building is
A)the sum of economic depreciation and forgone interest.
B)economic depreciation only.
C)forgone interest only.
D)the cost of using an alternative building.
E)the rent paid on the building.

Question

Quizplus · Accepted Answer

The implicit rental rate to a firm of owning a building includes both economic depreciation (the decrease in value of the property over time due to wear and tear and aging) and forgone interest (the interest that could have been earned if the money used to purchase the building had been invested elsewhere). This represents the economic cost to the firm of using the building, equivalent to what it would cost to rent a similar building.

The Implicit Rental Rate to a Firm of Owning a Building