A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20 000 a year, and take over a store building that he owns and currently rents to his brother for $6000 a year. His expenses at the sushi bar would be $50 000, for food and $2000 for gas and electricity. What are his implicit costs?

Question

Quizplus · Accepted Answer

Implicit costs are the opportunity costs of using resources that the firm already owns. Here, the chef's implicit costs include the salary he would forego ($20,000) and the rent he would no longer earn ($6,000), totaling $26,000.

A Young Chef Is Considering Opening His Own Sushi Bar