Suppose Winston's annual salary as an accountant is $60,000 and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. He outlays $8,000 in cash to cover all the costs involved with running the business and earns revenues of $150,000. What is Winston's implicit cost?

Question

Quizplus · Accepted Answer

Implicit costs include the opportunity costs of using resources that could have been used for another purpose. For Winston, this includes his forgone salary of $60,000 and the $4,000 in interest he would have earned from his financial assets, totaling $64,000.

Suppose Winston's Annual Salary as an Accountant Is $60,000 and His