Stan owns a software design business.He obtained a bank loan to buy computer equipment for his business.He pays $1,000 per month for interest on the loan.He has 10 employees, each of whom is paid $4,000 per month.Because his business has been successful, next month he will increase employee wages to $5,000.If the revenue from his business remains at its current level, Stan is considering an addition to his office.Which of the following statements regarding Stan's business is false?
A)The payments Stan makes to his employees are variable costs and explicit costs.
B)The monthly payment Stan makes for his bank loan is an implicit cost.
C)The monthly payment Stan makes for his bank loan is a fixed cost.
D)The addition Stan is considering to make to his office would be an implicit cost.

Question

Quizplus · Accepted Answer

The monthly payment Stan makes for his bank loan is an explicit cost, not an implicit cost. Implicit costs are non-monetary opportunity costs, while explicit costs involve direct monetary payments.

Stan Owns a Software Design Business