Ralph owns a small pizza restaurant,where he works full-time in the kitchen.His total revenue last year was $100,000,and his rent was $3,000 per month.He pays his one employee $2,000 per month,and the cost of ingredients and overhead averages $500 per month.Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby.His total explicit costs for the year were:

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Ralph's explicit costs include rent ($3,000 x 12 = $36,000), employee wages ($2,000 x 12 = $24,000), and ingredient/overhead costs ($500 x 12 = $6,000), which total $66,000. His opportunity cost (the amount he could have earned at the competing pizza restaurant) does not factor into his explicit costs.

Ralph Owns a Small Pizza Restaurant,where He Works Full-Time in the Kitchen.His