Question

Jessica Simpson has decided to open a small fast food place that specializes in Buffalo wings. To do so she must resign from her current full time position which pays her $40,000/year and take over a small store-front building which she already owns but currently rents to her brother, Homer, for $6,000/year. Her annual expenses at the restaurant will be $50,000 for the food and $2,000 for gas and electricity. What are her explicit costs

Answer 1

Answer:

$52,000

Explanation:

Explicit cost is the cost she incurs while setting up her resutrant.

=$50,000 + $2000 = $52,000

Her implicit cost or opportunity cost is the cost of the next best option forgone when one alternative is chosen over other alternatives. It is what she would have been earning if she didn't leave her job.

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