Mika withdraws $100,000 from her trust fund to open up her own manicure business. The trust fund earns 4 percent interest. In order to properly account for all costs of her business, Mika must not forget: A)the implicit cost of $104,000. B)the implicit cost of $4,000. C)the explicit cost of $104,000. D)the explicit cost of $4,000.

Question

Quizplus · Accepted Answer

The implicit cost of $4,000 represents the foregone interest that Mika would have earned if she had left her $100,000 in the trust fund. This is an opportunity cost, not a direct outlay of cash, hence it is considered an implicit cost.

Mika Withdraws $100,000 from Her Trust Fund to Open Up