Marge opens an oxygen bar in a building she owns.She used to rent the building to her brother in law for $10,000 a year.To open the oxygen bar,Marge quit her job as a physician assistant,which paid $80,000 a year.As a bar owner,Marge has to pay $40,000 a year wages for her bartender,spend $25,000 a year for supplies,and the utilities bill is $9,500 a year.To cover the start-up costs,she used up all of her savings which earned $4,600 in interest.What are her implicit costs?
A) $10,000
B) $90,000
C) $84,600
D) $94,600
E) $74,500

Question

Quizplus · Accepted Answer

Implicit costs include the opportunity costs of using resources that Marge already owns. These are the foregone rental income ($10,000), her foregone salary as a physician assistant ($80,000), and the foregone interest from her savings ($4,600), totaling $94,600.

Marge Opens an Oxygen Bar in a Building She Owns