Rola quit her job as a buyer for Center Point to start her own hair dressing salon, Goldilocks. She gave up a salary of US$40,000 per year, invested her savings of US$30,000 (which was earning 5 percent interest) and borrowed US$10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Rola spent US$18,000 to rent a salon, hired a part -time assistant for US$12,000 and incurred another US$15,000 on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs?

Question

Quizplus · Accepted Answer

Implicit costs include the salary Rola gave up (US$40,000), the interest she would have earned on her savings (US$30,000 * 5% = US$1,500), and the interest on the borrowed amount (US$10,000 * 5% = US$500). Adding these together gives US$42,000.

Rola Quit Her Job as a Buyer for Center Point