Remi owns a small pizza restaurant,where he works full-time in the kitchen.His total revenue last year was $100,000,and his rent was $3,000 per month.He pays his one employee $2,000 per month,and the cost of ingredients and overhead averages $500 per month.Remi could earn $35,000 per year as the manager of a competing pizza restaurant nearby.His total explicit costs last year were

Question

Quizplus · Accepted Answer

Total explicit costs are the out-of-pocket expenses incurred by a firm to produce its output. In this case, the explicit costs include rent ($3,000 x 12 = $36,000), employee wages ($2,000 x 12 = $24,000), and the cost of ingredients and overhead ($500 x 12 = $6,000), for a total of $66,000. The opportunity cost of Remi's time, which is the forgone salary he would have earned if he worked as a manager elsewhere, is not an explicit cost since it is not an actual out-of-pocket payment. Therefore, the answer is D) $66,000.

Remi Owns a Small Pizza Restaurant,where He Works Full-Time in the Kitchen.His