Refer to Scenario 7.4 below to answer the question(s) that follow.
SCENARIO 7.4: You own and are the only employee of a company that sells custom embroidered pet sweaters.
Last year your total revenue was $120,000. Your costs for equipment, rent, and supplies were $30,000.
To start this business you invested an amount of your own capital that could pay you a $50,000 a year return.
-Refer to Scenario 7.4. During the year your economic costs were
A) $30,000.
B) $50,000.
C) $80,000.
D) $120,000.

Question

Quizplus · Accepted Answer

Economic costs include both explicit costs (like equipment, rent, and supplies) and implicit costs (like the opportunity cost of the capital invested). Here, explicit costs are $30,000 and the opportunity cost (implicit cost) of the capital is $50,000, totaling $80,000.