Megan used to work at the local pizzeria for $15,000 per year but quit in order to start her own deli.To buy the necessary equipment,she withdrew $20,000 from her inheritance (which paid 8 percent interest).Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000.She asked her dad the accountant and her mom the economist to calculate her costs for her.
A)Dad says her cost is $9,000 and Mom says her cost is $2,400.
B)Dad says her cost is $31,000 and Mom says her cost is $35,000.
C)Dad says her cost is $25,000 and Mom says her cost is $16,600.
D)Dad says her cost is $31,000 and Mom says her cost is $47,600.

Question

Quizplus · Accepted Answer

Dad's calculation likely includes the explicit costs: $25,000 for ingredients and $6,000 for rent ($500 per month x 12 months), totaling $31,000. Mom's calculation includes both explicit and implicit costs. The implicit costs include the $15,000 salary Megan gave up, the $1,600 interest lost on the inheritance ($20,000 x 8%), in addition to the explicit costs of $31,000, totaling $47,600.

Megan Used to Work at the Local Pizzeria for $15,000