A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays 20,000 a year, and take over a store building that he owns and currently rents to his brother for 6,000 a year. His expenses at the sushi bar would be 50,000 for food and 2,000 for gas and electricity. What are his explicit costs?
a. 26,000
b. 66,000
c. 78,000
d. 52,000
e. 72,000
QUESTION 2John moved his office from a building he was renting downtown to the carriage house he owns in back of his house. How will his costs change?
a. explicit and implicit costs rise
b. explicit costs rise; implicit costs fall
c. explicit and implicit costs fall
d. explicit costs fall; implicit costs rise
e. not enough information is given
QUESTION 3Opportunity cost usually
a. cannot be measured
b. applies to labor but not to capital
c. is involved in calculating economic profit
d. is greater than the cash payment made to a resource
e. is less than the cash payment made to a resource
QUESTION 4The difference between a firm's total revenue and what must be paid to attract resources from their best alternative use is called
a. total revenue
b. utility
c. economic profit
d. cost
e. production efficiency
QUESTION 5If a firm's economic profit is positive, its accounting profit must also be positive.
a. True
b. False
QUESTION 6If all my savings are invested in my consulting company, an increase in the interest rate increases my implicit costs.
a. True
b. False
QUESTION 7Explicit costs are
a. not part of opportunity cost
b. the only cost considered in opportunity cost
c. exactly the same as implicit costs
d. actual monetary payments for resources purchased
e. the opportunity costs of using resources owned by the firm
QUESTION 8The opportunity cost of a resource
a. includes both explicit and implicit cost
b. includes explicit cost only
c. includes implicit cost only
d. is equal to the market price of the resource
e. is not related to the market price of the resource
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