Which of the following is an implicit cost of owning a business?
(i) forgone savings account interest when personal money is invested in the business
(ii) interest expense on existing business loans
(iii) foregone rental income when using an owner-occupied office
A)(i) only
B)(ii) only
C)(ii) and (iii)
D)(i) and (iii)

Question

Quizplus · Accepted Answer

(i) is an implicit cost because it is the opportunity cost of using personal money for the business instead of investing it in a savings account.
(iii) is also an implicit cost because it is the opportunity cost of not renting out the office space and earning rental income. (ii) is an explicit cost because it involves an actual expense of paying interest on a loan, not the opportunity cost of using the money for other purposes.

Which of the Following Is an Implicit Cost of Owning