Lauren runs a Mexican restaurant in Carlton. Her total revenue last year was $110,000. The rent on her restaurant was $48,000, her labour costs were $42,000, and her materials, food and other variable costs were $20,000. Lauren could have worked as a biologist and earned $50,000 per year. An economist calculates her implicit costs as

Question

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Implicit costs are the opportunity costs of using resources that a business owner already owns. In this case, the implicit cost is the salary Lauren could have earned as a biologist, which is $50,000.

Lauren Runs a Mexican Restaurant in Carlton