Which of the following is an example of an implicit cost? i) the owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm
Ii) interest paid on the firm's debt
Iii) rent paid by the firm to lease office space
A) ii) and iii) only
B) i) and iii) only
C) i) only
D) iii) only

Question

Quizplus · Accepted Answer

An implicit cost is a cost that is not an actual expense but rather an opportunity cost or the cost of forgoing an alternative opportunity. The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm is an example of an implicit cost. Interest paid on the firm's debt and rent paid by the firm to lease office space are explicit costs as they involve actual expenses paid by the firm. So, option i) is the example of an implicit cost, and options ii) and iii) are explicit costs. Thus, the correct choice is (C) i) only.

Which of the Following Is an Example of an Implicit