Refer to Scenario 7.5 below to answer the question(s) that follow.
SCENARIO 7.5: You own and are the only employee of a company that customizes bicycles.
Last year your total revenue was $60,000. Your costs for rent and supplies were $25,000.
To start this business you invested an amount of your own capital that could pay you a $45,000 a year return.
-Refer to Scenario 7.5. During the year your economic costs were
A) $25,000.
B) $35,000.
C) $45,000.
D) $70,000.

Question

Quizplus · Accepted Answer

Economic costs include both explicit costs (like rent and supplies) and implicit costs (like the opportunity cost of the capital invested). Here, explicit costs are $25,000 and the implicit cost (the forgone salary of $45,000) totals to $70,000.