Stan owns a software design business. He obtained a bank loan to buy computer equipment for his business. He pays $1,000 per month for interest on the loan. He has 10 employees, each of whom is paid $4,000 per month. Because his business has been
successful, next month he will increase employee wages to $5,000. If the revenue from his business remains at its current level, Stan is considering an addition to his office. Which of the following statements regarding Stan's business is false?
A) The payments Stan makes to his employees are variable costs and explicit costs.
B) The monthly payment Stan makes for his bank loan is an implicit cost.
C) The monthly payment Stan makes for his bank loan is a fixed cost.
D) The addition Stan is considering to make to his office would be an implicit cost.
Answer: B
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Indicate whether the statement is true or false
Firms are assumed to be price takers in a perfectly competitive market because
a. they are not allowed by law to charge any price other than the market price b. they must accept any price offered by consumers c. they earn high enough profits at the market price, so they do not want to hurt consumers by raising their prices d. each firm is too small to influence the market price e. there are too few buyers in the market to absorb price changes