John moved his office from a building he was renting downtown to the carriage house he owns in back of his house.How will his costs change?
A)explicit and implicit costs rise
B)explicit costs rise; implicit costs fall
C)explicit and implicit costs fall
D)explicit costs fall; implicit costs rise
E)not enough information is given

Question

Quizplus · Accepted Answer

By moving his office to the carriage house, John will no longer have to pay rent for the downtown building, which will result in a decrease in his explicit costs. However, he will now have to bear the opportunity cost of using the carriage house for his business instead of renting it out to someone else, resulting in an increase in his implicit costs. Therefore, his explicit costs will fall while his implicit costs will rise.

John Moved His Office from a Building He Was Renting