Priya needs $50,000 to start up her own business and get it off the ground. She can either withdraw the money from her savings account, where she currently earns 2 percent, or she can take out a loan for $50,000 and pay 2 percent interest. Priya should compare _____ and choose to _____. A)the implicit cost of $1,000 to the explicit cost of $51,000; use her savings B)the implicit cost of $51,000 to the explicit cost of $1,000; borrow the money C)the explicit cost of $1,000 to the implicit cost of $1,000; either use her savings or borrow the money, as each option costs the same D)the explicit cost of $1,000 to the implicit cost of $51,000; borrow the money

Question

Quizplus · Accepted Answer

The explicit cost of withdrawing from savings or taking a loan is the interest paid or foregone, which is $1,000 in both cases (2% of $50,000), making the costs equivalent.

Priya Needs $50,000 to Start Up Her Own Business and Get