Two friends,Diane and Sam,own and run a bar.Diane tends the bar on Mondays,Wednesdays,and Fridays and receives a wage in addition to tips.Sam tends the bar on Tuesdays,Thursdays,and Saturdays and receives only tips.Which of the following represents an implicit cost of operating the bar?
A)Diane's wages
B)Sam's time
C)Diane's tips
D)Sam's tips
E)Both Diane's and Sam's tips

Question

Quizplus · Accepted Answer

Implicit costs are those that represent 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 he could have earned using his time elsewhere. Diane's wages and both of their tips are explicit costs, not implicit.

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