Mike wants to open his own repair shop, and is considering using his savings of $30,000 to get it started. He is currently earning 3 percent interest on his savings. His friend Bob calls him and asks to borrow $30,000 to start up a bagel shop; Bob offers to pay him 5 percent interest if he loans him the money. If Mike were to use the money to open his own repair shop, how can he accurately account for his costs?
A. Mike must consider the $900 in forgone interest on his savings as an implicit cost.
B. Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an implicit cost.
C. Mike must consider the $900 in forgone interest on his savings as an explicit cost.
D. Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an explicit cost.
B. Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an implicit cost.
You might also like to view...
In using a prisoners' dilemma game to model the behavior of firms within an oligopoly, we are assuming that:
a. each firm seeks to act in its best interest. b. each firm seeks to act in the best interest of the industry as a whole. c. all firms will pursue the same strategy. d. each firm will pursue a different strategy.
If the graph shown is displaying a competitive labor market, the equilibrium wage in the market would be:
A. D. B. S. C. P*. D. Q*.