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 fall, while his implicit costs will rise.
E)His explicit costs will rise, while his implicit costs will remain the same.

Question

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 fall, while his implicit costs will rise.
E)His explicit costs will rise, while his implicit costs will remain the same.

Quizplus · Accepted Answer

When John moves his office from a rented building to his own carriage house, his explicit costs will decrease as he is no longer paying rent. However, his implicit costs will increase because he is now using his own property for his office space, which means he is giving up the opportunity to rent it out or use it for some other purpose that could have generated income. Therefore, the answer is D, his explicit costs will fall, while his implicit costs will rise.

John Moved His Office from a Building He Was Renting