Refer to Scenario 7.2 below to answer the question(s) that follow.
SCENARIO 7.2: You are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of $100,000. Your costs for rent and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a return of $20,000 a year.
-Refer to Scenario 7.2. During the year your economic costs were
A) $70,000.
B) $60,000.
C) $50,000.
D) $20,000.

Question

Quizplus · Accepted Answer

Economic costs include both explicit costs (like rent and supplies) and implicit costs (like the forgone return on your own capital). Here, explicit costs are $50,000 and implicit costs are $20,000, totaling $70,000.