Question

Diego wants to expand his business to build a warehouse and office building for $2 million. He'll use the 5 acre property he owns and currently rents to a local cattle rancher for $5,000. What are the implicit costs of of this expansion

Answer 1

The rents of $5,000 that Diego currently receives from the local cattle rancher are the implicit costs of this expansion.

What is an implicit cost?

An implicit cost can e described as the opportunity cost that a company must forgo in order to use a factor of production that it already owns and hence does not have to pay rent for it.

In this case, the implicit costs are the $5,000 rents Diego currently receives from the local cattle rancher

Implicit cost is the polar opposite of an explicit cost which is paid directly such as the $2 million Diego wants to build a warehouse and office building.

Learn more about implicit and explicit costs here: brainly.com/question/14177709.

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