Question

Madeline quits her job, at which she was earning $20,000 per year, and takes $50,000 out of savings and uses it to buy inventory for her business. She also pays $10,000 in rent on the building and $15,000 in additional labor costs.
Madeline's explicit costs are:

Y/N the interest that could have been earned on Madeline's savings.
Y/N the cost of inventory.
Y/N the salary that Madeline could have earned.
Y/N the cost of additional labor.
Y/N the cost of the building.

Madeline's implicit costs are:
Y/N the salary that Madeline could have earned.
Y/N the cost of inventory.
Y/N the cost of the building.
Y/N the cost of additional labor.
Y/N the interest that could have been earned on Madeline's savings.

Answer 1

Answer:

Explanation:

Explicit costs are the ones that exist because there is an exchange of cash and are recorded in accounting calculations. The implicit costs are the ones that are not an exchange of cash and are not recorded in accounting calculations. The implicit costs are associated with the opportunity costs. The opportunity costs are the costs that someone have when they decide to do something and not doing another thing. In this case, Madeline decided to stop working for making her own business.

The opportunity costs or implicit costs are:

- The salary that Madeline could have earned

- The interest that could have been earned on Madeline's savings

The explicit costs are:

- The cost of inventory

-The cost of additional labor

-The cost of the building rent