John moved his office from a building he was renting downtown to the carriage house he owns behind his house.Which of the following statements shows how his costs change?
A)Both his explicit and implicit costs will rise.
B)His explicit costs will rise, while his implicit costs will fall.
C)Both his explicit and implicit costs will fall.
D)His explicit costs will fall, while his implicit costs will rise.
E)His explicit costs will rise, while his implicit costs will remain the same.

Question

Quizplus · Accepted Answer

By moving his office to the carriage house, John is no longer paying rent for his office space, which reduces his explicit costs. However, he now has the implicit cost of forgone rent income from the carriage house, as he is using it for his office instead of renting it out. Therefore, his implicit costs will rise.

John Moved His Office from a Building He Was Renting