Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's
A)total revenue.
B)opportunity costs.
C)explicit costs.
D)marginal costs.

Question

Quizplus · Accepted Answer

The $40,000 income that Jamar gave up is his opportunity cost, as it represents the highest valued alternative that he gave up by starting the life-coaching business. Therefore, it is considered an explicit cost when calculating the economic profit of his business.

Jamar Used to Work as an Office Manager, Earning $40,000