Question

In central Florida, the demand for real estate has been increasing rapidly for years. This reality, in combination with occasional freezes that kill orange trees, has led many orange grove owners to sell their land to real estate developers. Because of the freezes and land demand, the ________ cost of capital is ________ in central Florida's orange groves.
a. explicit; decreasing
b. implicit; increasing
c. implicit; decreasing
d. explicit; increasing
e. total; decreasing

Answer 1

Answer:

b. implicit; increasing

Explanation:

The implicit cost of capital refers to the opportunity cost of making a specific investment used by a business. Thus, because occasional freezing weather affects orange trees, grove owners are forced to sell their land. As a consequence, real state developers multiply their financing.