Arya makes earrings in the shape of the mascot of a local university. Last year, Arya made 250 pairs of earrings, which she sold to the university bookstore for $10 each. Arya works out of her home with material cost of $3 per pair and $85 for tax help. If Arya did not produce earrings, she would spend her time watching television. Based on this information, Arya's implicit cost is zero.

Question

Quizplus · Accepted Answer

Implicit costs are the opportunity costs of using resources owned by the business for business purposes, instead of their best alternative use. Since Arya would have spent her time watching television, which does not generate income, her implicit cost is zero.

Arya Makes Earrings in the Shape of the Mascot of a Local