Pete owns a shoe-shine business. Which of the following costs would be implicit costs?

Question

Quizplus · Accepted Answer

Implicit costs refer to the opportunity costs of resources that are already owned by the firm, thus, not requiring explicit payment. 
(i) Rent - This is an explicit cost as it requires a payment to be made for the use of a resource that is not owned by the firm.
(ii) Wages paid to employees - This is also an explicit cost as it requires a payment to be made to the employees for their labor.
(iii) Opportunity cost of the owner's time and effort - This is an implicit cost as it is the cost of the owner's time and effort in running the business, which is not receiving any explicit payment.
(iv) Interest forgone on the owner's savings - This is also an implicit cost as it refers to the interest income that the owner could have earned if the savings were invested elsewhere but is not receiving any explicit payment for this.

Pete Owns a Shoe-Shine Business