An entrepreneur invests $10,000 of her personal savings in her new business venture. Furthermore, she takes out $30,000 in loans.Are the interest payments she makes on her business loans considered an explicit cost or an implicit cost? Explain.She was earning interest income on her savings. Now that she withdrew those funds, she is no longer earning that interest income. Is that an example of an explicit cost or an implicit cost? Explain.

Opportunity cost: - opportunity cost is a forgone benefit that we could have earned by applying all…

Answered: An entrepreneur invests $10,000 of her…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter7: Production Economics

Section: Chapter Questions

Problem 3E

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An entrepreneur invests $10,000 of her personal savings in her new business venture. Furthermore, she takes out $30,000 in loans.
1. Are the interest payments she makes on her business loans considered an explicit cost or an implicit cost? Explain.
2. She was earning interest income on her savings. Now that she withdrew those funds, she is no longer earning that interest income. Is that an example of an explicit cost or an implicit cost? Explain.

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