Two friends, Diane and Sam, own and run a bar. Diane tends bar on Monday, Wednesday, and Friday and receives a wage in addition to tips. Sam tends bar on Tuesday, Thursday, and Saturday and receives only tips. Which of the following represents an implicit cost of operating the bar?

Question

Quizplus · Accepted Answer

Implicit costs are the opportunity costs of using resources that the firm already owns. Sam's time is an implicit cost because it represents the opportunity cost of what Sam could earn or do with his time if he weren't working at the bar. Diane's wage and both Diane's and Sam's tips are explicit costs, not implicit costs.

Two Friends, Diane and Sam, Own and Run a Bar