Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?
A)payments of wages to its office workers
B)rent paid for the use of equipment owned by the Schultz Machinery Company
C)use of savings to pay operating expenses instead of generating interest income
D)economic profits resulting from current production

Question

Quizplus · Accepted Answer

Implicit costs are the opportunity costs of using resources that the firm already owns. Choice C, the use of savings to pay operating expenses instead of generating interest income, represents an opportunity cost because the company is foregoing the interest income it could have earned by keeping the savings in an interest-bearing account.

Which of the Following Constitutes an Implicit Cost to the Johnston