Dave's Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave's Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. Dave's Batting Cages incurred _________ in implicit costs.

Question

Quizplus · Accepted Answer

Implicit costs are the opportunity costs of resources owned by the firm. In this case, Dave's implicit costs are the foregone salary from his previous job ($50,000) and the foregone interest income from the loan he took out to open the business ($1,500). Therefore, the total implicit costs are $50,000 + $1,500 = $51,500.

Dave's Batting Cages Is Located in Boston, Massachusetts