Question

Jack owns a bicycle shop where he sells and repairs bicycles. His revenue is $400,000 per year. His shop is in a building that he owns and could rent for $20,000 per year. He has an assistant to whom he pays a $30,000 salary each year. He paid $100,000 to purchase the inventory of bicycles he sells. He pays a total of $50,000 in taxes, insurance, and utilities each year. In order to operate his shop, Jack gave up his job as a CPA, where he earned $100,000 per year. What are Jack's implicit costs

Answer 1

Answer:

Total implicit cost for Jack 120,000 per year

Explanation:

The implicit cost are the cost of the factors if used in the best alternative for their current use:

Land Factor (building)

The rent it could get: 20,000

Wages Factor( theri potential wages)

CPA wages 100,000

Total implicit cost (also called opportunity cost) 120,000