Answer to Question #52909 in Microeconomics for Yana

Question

Explain your circled answer:
A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays BAM 20,000 a year, and take over a store building that he owns and currently rents to his brother for BAM 6,000 a year. His expenses at the sushi bar would be BAM 50,000 for food and BAM 2,000 for gas and electricity. What are his explicit costs?
a. BAM 26,000.
b. BAM 66,000.
c. BAM 78,000.
d. BAM 52,000.
e. BAM 72,000.

Answer 1

If a young chef would have to quit his current job, which pays BAM 20,000 a year, and take over a store building that he owns and currently rents to his brother for BAM 6,000 a year, so his expenses at the sushi bar would be BAM 50,000, for food and BAM 2,000 for gas and electricity. Then his implicit costs are a salary of 20,000 and rent for the store of 6,000, so implicit costs are 26,000 and the right answer is:
a. BAM 26,000.